Everywhere in the world, we celebrate Earth Day on April 22 to show our support for environmental protection. A lot has changed since the first Earth Day 50 years ago.
Earth Day is a good time to wonder what we can do concretely to make the world a better place.
You can go green in many ways, including with your investments. You can support companies that preserve the environment and act in socially responsible and ethical ways through sustainable (or socially responsible) investing.
Sustainable investing involves screening investments based on environmental, social, and governance (ESG) criteria, which is a set of standards used to classify companies.
Sustainable investing enables you to invest in companies whose values, behaviors, and beliefs best match up with yours. You may choose not to invest in tobacco or nuclear companies and buy shares in solar energy firms instead.
True business sustainability isn’t just about minimizing negative environmental and social impacts but is also about creating positive ones. Sustainable companies actively contribute to the world’s sustainability problems. Starbucks (NASDAQ:SBUX) and Apple (NASDAQ:AAPL) are two good examples.
Starbucks will eliminate plastic straws by 2020 and aims to develop fully compostable and recyclable cups by 2022. It also wants to operate 10,000 greener stores (using wind and solar energy) globally by 2025. More than 99% of Starbucks’ coffee is ethically sourced. The coffee maker commits to donating 100% of unsold food back to the community.
Apple has the goal of making without taking. Almost all the paper in its packaging comes from recycled or renewable resources, and the tech company purchased two forests to offset its paper consumption. Apple has reduced its comprehensive carbon footprint by 35% since 2015. Besides, it encourages volunteering and charitable giving among its employees.
Many investment managers around the world are taking into consideration companies’ ESG factors. An easy way to invest in sustainable companies is to buy a sustainability ETF or mutual fund. That way, you can hold many sustainable companies and diversify your risk.
The Xtrackers S&P 500 ESG ETF (SNPE) gives broad exposure to the U.S. stock market. It tracks the S&P 500 ESG ETF, which provides greater exposure to companies with more positive ESG records than the S&P 500.
You can also choose among ETFs that focus on particular areas, such as environment, reduced carbon emissions, and gender diversity. For instance, the iShares MSCI ACWI Low Carbon Target ETF invests in companies that have low greenhouse emissions. Top holdings include Apple, Microsoft (NASDAQ:MSFT), and Amazon (NASDAQ:AMZN).
For global exposure, the iShares MSCI Global Impact ETF could be a suitable option. The ETF invests in companies that not only have reliable and socially responsible practices but also build their business around products and services that can lead to positive change. The top three positions are Gilead Sciences (NASDAQ:GILD), Procter and Gamble (NYSE:PG), and East Japan Railway (TYO:9020).
By investing in sustainable companies, you can reduce your risk and potentially generate higher returns. Many studies have found a positive correlation between a company’s profitability and ESG criteria. So, you can have good returns while doing good for the planet.
Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com and should not be considered investment advice from CCN.com. The author holds shares of Microsoft.
This article was edited by Sam Bourgi.
Last modified: April 22, 2020 8:21 PM UTC