Green Investing

“Green Investing” is the phrase I use to describe the process of aligning your investments with your values, social as well as environmental. Many people don’t know that they own companies in their mutual funds and retirement plans that conflict with their beliefs.

Financial advisors who specialize in this area use different terms to describe what we do: socially responsible investing, ethical investing, sustainable investing and many more. Whatever term we use, most of us would agree there are three key components of green investing: social screening, shareholder activism and community loans.

• Social Screening involves the active avoidance or screening out of companies whose products (such as tobacco) or business conduct (such as major pollution issues) that are contrary to the investor’s ethical beliefs. This process also involves selecting companies that make a favorable contribution to society and the Earth. Some of these are alternative energy, natural foods and environmental clean-up products.

• Shareholder activism involves taking an active role in the management of a company you own. Most commonly, proxy voting is used to bring resolutions to a vote of all the stockholders in hopes of changing objectionable corporate policies.

• Community loan funds provide economic incentives and low-cost loans through progressive banks and credit unions.

I’m constantly amazed when my clients tell me that their financial advisors insulted them and made them feel foolish for caring as much about where they invested as about how much they made.

There is a myth that by investing with social concerns you will make less money. This is a different way of investing that may or may not perform better. Any broker who says that Investment A will do better than Investment B in the future is doing you a disservice. The future is an unknown.

Each of us has a set of values and principles that guide us through life. You wouldn’t vote for someone whose views are the opposite of your values, so why invest in companies whose policies you oppose. If you believe strongly in your values, maybe it’s time to align your investments with those values.