More businessmen and investors are attesting to the fact that going greener is the only way to do business these days. More money and assets are being placed in what people call socially responsible investing. Many people also call this environmental investing. However, there is a big difference between an environmental investment and a socially responsible investment.
Is it purchasing an entire line of high-end wind turbines to sustain a long-term wind power project? Or does the simple acquisition of shares in a company that employs green architecture and other energy-saving strategies constitute environmental investing?
Types of Socially Responsible Investing
Most commonly, people confuse an environmental investment, a sustainable investment, and an ethical investment with one another. While all of these investment strategies are helpful to the environment and they are all sound strategies that can yield positive results, not all of them are the same. Investing in one may seem like investing in another, but knowing the difference among these three strategies will help you attain your financial objectives more easily.
- Ethical Investing. This is pretty much the umbrella term for all kinds of investing. Ethical investors employ negative screening when scouting for investments. They filter out those that have unpleasant effects on the environment and world, like animal cruelty, alcohol, and abuse of human rights.
- Sustainable Investing. It is under ethical investing but it takes the bar a notch up higher. Investors not only screen for harmful environmental effects, they also look for businesses that have the most environmentally sound policies, such as in the use of natural resources, treatment of employees, and governance issues.
- Environmental Investing. Investment analysts had the hardest time defining this type of investing, so they took the “problem and solution” approach. For an investment, there’s a problem to be solved. For example, renewable energy investments can help deal with global warming. Aquaculture can help alleviate the problem of declining fish stocks. Better technology can help reduce pollution caused by vehicles.
The Differences Among Environmental Investment, Sustainable Investment, and Ethical Investment
Are Green Funds an Environmental Investment?
Green funds are a great diversification tool because you can invest in several different companies at one time. However, if we stack them up against the “problem and solution” approach, you wouldn’t exactly consider them environmental investing since green funds, by themselves, do not directly offer a solution to the problems plaguing the environment. Say, for example, you invest your money in an energy-efficient property trust fund to help deal with depleting oil reserves. Although the fund will help, it is not the real solution since, for all you know, the property could still be using electricity generated from a coal power plant.
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