5 REASONS WHY GREEN INVESTING MATTERS
1: TALK THE TALK, AND WALK THE WALK
Whether you classify yourself as a full fledged environmentalist or you’re simply someone who tries to make sustainable choices, you care. Green investing gives investors the opportunity to quite literally put their money where their mouth is and make investment decisions that back up their principles.
2: HAVE A VOICE IN COMPANY DECISIONS
Experienced investors are likely familiar with what are known as proxy cards. The vast majority of investors throw these away before they even make it inside form their mailbox. If you’ve been guilty of throwing them out without reading them, or you are new to investing, let me explain what they are. Every year, companies have shareholder meetings and they vote on issues from board of director positions, to specific projects. Because most individual investors don’t live near where the meetings take place, the proxy card enables them to mark down their choices on the issues up for vote, and then elect someone who will be at the meeting to vote in their place. In a nutshell, what this means is that if you own shares of a company you actually have a voice, albeit a small one, in the decisions the company makes and you can help steer them in a greener direction.
3: INFLUENCE MANAGEMENT TO MAKE GREENER CHOICES
The biggest power that individual investors have in company decision making does not come from proxy voting. It comes from the laws of supply and demand, and the method in which executives are paid. There are two things going on here;
CEOs and company executives are often paid in several ways but one of the largest ways is through performance based incentives and in most cases performance is tied to the share price of the company.
Supply and demand dictate that if investors sell a particular stock in mass they can push the share price lower. Conversely if investors buy shares they raise the price of the stock higher.
If you as an individual don’t like the way a company is behaving, you can sell the stock. You doing that alone will not have any effect on the share price. But if thousands of people or more do the same thing, as a group we can affect the price and push it downward. Pushing that price downward means management will likely face a reduction in their pay. Thus as a group, we have just provided company directors with a personal incentive to fix their behavior.
4: SLEEP BETTER AT NIGHT
I don’t write the following to make anyone feel bad. But here is the reality. You might drive an electric car, have solar panels on your house, compost your food waste and recycle as much as you can. But if you own a share of an index that tracks the S&P 500 5-10% of your investment is in companies that do business in fossil fuels. I am tremendously sorry if that just burst anyones bubble. But this is why green investing matters. We want you to have the peace of mind of knowing that not only do you not spend your money at companies that harm the environment, you don’t own them in your portfolio either.
5: GET AHEAD OF THE CURVE
Green investing has absolutely exploded in popularity in the recent years. But the reality is it still represents a tiny portion of the overall investing world. Becoming involved in it now gives you the opportunity to be an early adapter. I don’t just say that to give you a pat on the back. Overall sentiment is changing not just in investing but overall. As more and more companies and governments start to adapt to the demands for action on climate change, we will likely see an increase in regulation. Investing in green companies now means that as regulations tighten, the companies you own will not be required to spend extra capital making adjustments to comply. This could potentially lead to a competitive advantage and additional profits for the investors.