Evaluating Green Equity Investments

Climate change is an environmental topic that nearly everyone is familiar with, but it isn't the only environmental concern. On the other side of the coin, everything that relates to the environment isn't always full of bad news. In fact, heightened awareness of environmental concerns has fostered a wave of technological innovation, given birth to a variety of new businesses and transformed many aspects of the way business is done. It has also changed the way many of us live. With nearly every one of those changes comes opportunity, and for equity investors, there are several easy ways to invest in these opportunities.

SEE: Socially Responsible Mutual Funds

Mutual Funds
Mutual funds provide an easy way to go "green." From socially responsible funds that include green companies in their portfolios to funds that exclusively focus on green companies, there are many possibilities to consider. Some funds focus on large cap companies, while others stick with small caps.

Investment strategies also run the gamut, with some fund managers investing in firms that engage in the best environmental practices for their respective industries, which can include business that you wouldn't necessarily expect, such as oil companies and large computer manufacturers. While these companies may not fit your definition of green, they may be the best of the bunch when compared to their peers.

Of course, plenty of managers focus on the green space, investing in companies that are actively seeking to reduce their impact on the environment by reducing their carbon footprints, engaging in environmentally friendly business practices, or creating the tools and technologies that represent the cutting edge in terms of efforts to combat global warming and reduce dependence on fossil fuels.

Simply check out the funds' stated philosophies and strategies, choose the fund that supports your beliefs and you've got an entire green portfolio ready and waiting.

Exchange-Traded Funds
Exchange-traded funds (ETFs) provide another way to go green. Unlike mutual funds, in which actively managed portfolios provide an opportunity for investment managers to implement their best ideas and change the portfolio as necessary, ETFs are passively managed investments that often track benchmark indexes. In the green space, there are ETFs that track indexes related to producing green and renewable energy, the transition from old to new technologies, nuclear power, technological innovation and more. Numerous choices are currently available and more are in the works.

A general rule for comparing ETFs is to take a close look at each fund's expense ratio and trading volume. A low expense ratio is good news; it reduces the amount you will pay over time to remain invested in the fund. An extremely low trading volume may not be such a good idea because some of the smaller ETFs may be relatively illiquid, and this may make it difficult to get out of your position.

Stocks
If you prefer to build your portfolio one company at a time, individual stocks provide plenty of opportunities to choose from. Small cap companies provide pure-play opportunities in the form of opportunities to invest in companies that engage in eco-friendly efforts as part of their primary business. The development of a host of new technologies in everything from waste management to energy efficiency is being pioneered by small cap companies.

While not generally offering the depth and variety of pure-play opportunities, large caps can still provide some access to eco-friendly efforts. Many large power companies use wind and water to produce at least a portion of their energy and numerous corporations and conglomerates engage in the design, manufacture and production of materials that are used in power generation, pollution control and other aspects of a variety of green businesses.

Evaluating Green Investments
There are no set green criteria that identify suitable investment opportunities, although mutual funds are an easy place to start looking because "green" mutual funds often label themselves accordingly. They also provide information about their screening methodologies, which enables investors to determine whether they agree with those standards. A quick online search for the terms "green mutual fund" and "socially responsible mutual fund" will certainly get you started in the right direction.

A host of indexes have also been created to benchmark environmentally friendly stocks. For example, the Cleantech Index is composed of leading companies that derive at least 50% of their revenues or profit from clean tech products and services. Investors can also use them to make decisions about their own portfolios either by seeking mutual funds that mirror the indexes or by purchasing stock in companies listed by the benchmark.

Beyond the investment realm, there are other ways to conduct research and other methods by which to judge corporate behavior. A variety of organizations track corporate behavior and produce reports, which investors can use as they see fit. For example, the Climate Counts organization judges companies across a variety of industries and scores them based on 22 characteristics. Firms are then rated as either "stuck," "starting" or "striding" in their efforts to address climate change. These ratings are a simplistic method to identify companies that might be worth a closer look and to steer clear of those with the worst environmental practices.

Another easy way to take a closer look at a company that you are considering is to conduct a company-specific search. Once again, the internet is a great tool. Just type in the company name and add the words "environmental record" in the search bar. Try it with Exxon Mobil and then with Ben and Jerry's to get a better feel for the type of results that you can expect and the differences between them.

The Bottom Line
Regardless of the investment vehicles that you choose or the screening methodology that catches your fancy, do not forget to keep one eye on the bottom line. Engaging in environmentally sound practices may be a more expensive method of doing business than the standard methodology, which can hurt a company's profitability. Your heart is in the right place if you prefer to invest your money with firms that support your beliefs, just make sure your investments are in companies that are doing good, for both the environment and your portfolio.



More From Investopedia

--

Get stories like this on the Yahoo app and discover more every day.
Download it now.
Loading...
  • Wall Street opens slightly lower as oil falls Reuters - 6 minutes ago

    REUTERS - U.S. stocks opened slightly lower on Tuesday as weak oil prices weighed on energy stocks amid fading hopes of a deal to limit oversupply. The Dow Jones industrial average was down 16.4 points, ... … More »

  • US stocks fall on lower oil, weak trade forecast AFP - 8 minutes ago

    US stocks opened slightly lower Tuesday with petroleum-linked shares retreating on news suggesting a deal of major producers to limit oil output was less likely. Dow member Chevron lost 0.7 percent and ... … More »

  • Britain's Johnson: Rude poem was not brought up in Turkey
    Britain's Johnson: Rude poem was not brought up in Turkey Associated Press - 10 minutes ago

    Visiting Turkey, British Foreign Secretary Boris Johnson said Tuesday that his hosts had not brought up the controversy caused by a rude poem he composed mocking Turkish President Recep Tayyip Erdogan. ... … More »

  • Saudis, Iran dash hopes for OPEC oil deal in Algeria
    Saudis, Iran dash hopes for OPEC oil deal in Algeria Reuters - 19 minutes ago

    Saudi Arabia and Iran on Tuesday dashed hopes that OPEC oil producers could clinch an output-limiting deal in Algeria this week as sources said the group and non-member Russia were still trying to bridge differences between the kingdom and Tehran. … More »

  • RUBBER-Tokyo futures prices after evening session September 27 Reuters - 24 minutes ago

    Following are prices for Tokyo rubber futures at the end of the Tokyo market's evening session on Sep 2016. Contract Day Volume Evening Volume * Oct 170.0 21 169.2 8 * Nov 164.0 30 163.8 7 * Dec 163.5 ... … More »

  • Wolseley to cut up to 800 jobs in tough British market Reuters - 38 minutes ago

    Wolseley, which makes about 80 percent of its profit in the United States, said the 80 branch closures would take two or three years, resulting in restructuring charges of about 100 million pounds. Half its shareholders are UK investors. … More »

  • US home prices rose modestly in July Associated Press - 49 minutes ago

    U.S. home prices rose modestly in July, pulled up by strong gains in Portland, Seattle and Denver, a private index says. The Standard & Poor's CoreLogic Case-Shiller 20-city home price index rose 5.1 percent ... … More »

  • Global markets - Europe's bank angst sours U.S. debate rally
    Global markets - Europe's bank angst sours U.S. debate rally Reuters - 55 minutes ago

    Worries about Europe's banks wrenched stocks into reverse on Tuesday and halted a surge in Mexico's peso that followed Democrat Hillary Clinton's victory over Republican Donald Trump in the first U.S. presidential debate. Europe's mood soured as … More »

  • Europe's bank angst sours U.S. debate rally
    Europe's bank angst sours U.S. debate rally Reuters - 58 minutes ago

    Worries about Europe's banks wrenched stocks into reverse on Tuesday and halted a surge in Mexico's peso that followed Democrat Hillary Clinton's victory over Republican Donald Trump in the first U.S. presidential debate. Europe's mood soured as … More »

  • Philippines suspends 20 mines for environmental violations Associated Press - 1 hour 3 minutes ago

    Philippine officials on Tuesday recommended the suspension of 20 more mines, mostly nickel producers, for environmental violations, threatening to tighten supply from the world's top nickel ore exporter. ... … More »

  • 'Operational upset' at Shell's Bukom site - spokeswoman Reuters - 1 hour 15 minutes ago

    SINGAPORE/OSLO (Reuters) - An incident at Royal Dutch Shell's (RDSa.L) manufacturing site at Pulau Bukom in Singapore on Tuesday resulted in flaring with dark smoke at one unit but it has since subsided, a spokeswoman said. Shell declined to give … More »

  • European stocks falter amid Deutsche Bank, trade worries
    European stocks falter amid Deutsche Bank, trade worries Associated Press - 1 hour 19 minutes ago

    European stocks faltered Tuesday as investors worried over Deutsche Bank's outlook, a big decline in oil prices and a sharp downgrade in global trade predictions. The reaction in markets to the first U.S. ... … More »

  • Goldman Sachs' top Southeast Asia investment banker to leave-sources Reuters - 1 hour 21 minutes ago

    The head of Goldman Sachs' investment banking division in Southeast Asia, Michael Smith, is set to leave the bank, two people familiar with the matter said on Tuesday. Based in Singapore, Smith is a partner at Goldman and also heads the bank's … More »

  • Britain's first U.S. shale gas delivery arrives in stormy Scotland Reuters - 1 hour 42 minutes ago

    Britain's first shale gas delivery from the United States sailed into a heated European political debate on fracking on Tuesday and immediately ran into its first practical problem - the Scottish weather. The huge "Ineos Insight" tanker had entered … More »

  • Shell: Fire forces closure of key oil pipeline in Nigeria Associated Press - 1 hour 44 minutes ago

    Shell says a fire has forced it to close a key oil pipeline feeding Nigeria's strategic Bonny Export Terminal, which militants attacked last week. The ongoing challenges are losing oil multinationals billions ... … More »

  • NATO says Aleppo attacks 'blatant violation of international law'
    NATO says Aleppo attacks 'blatant violation of international law' AFP News - 1 hour 52 minutes ago

    NATO head Jens Stoltenberg said Tuesday the "morally totally unacceptable" bombardment of the Syrian city of Aleppo broke international law, and urged Russia to take genuine steps to restore a ceasefire. "The appalling attacks on Aleppo have shaken … More »

  • StanChart refers alleged corruption at Indonesian firm to authorities
    StanChart refers alleged corruption at Indonesian firm to authorities Reuters - 1 hour 53 minutes ago

    Standard Chartered (STAN.L) has referred allegations of impropriety at an Indonesian power company that the bank's private equity arm invested in to the appropriate authorities, the bank said on Tuesday. The Wall Street Journal earlier reported the … More »

  • Turkey dismisses 87 spy agency staff over failed coup
    Turkey dismisses 87 spy agency staff over failed coup AFP News - 1 hour 55 minutes ago

    Turkey has dismissed 87 staff from its spy agency over alleged links to the failed July 15 coup, state media said Tuesday, in the first purge of one of the country's most powerful institutions. National Intelligence Organisation (MIT) has suspended … More »

  • Oil prices slip as hopes for a deal in Algiers fade
    Oil prices slip as hopes for a deal in Algiers fade Reuters - 2 hours 12 minutes ago

    Crude oil futures fell on Tuesday as optimism faded for an output-limiting deal from an oil producer meeting in Algeria that has so far failed to yield any agreement to curb one of the worst supply gluts in history. Saudi Arabia on Tuesday dashed … More »

  • AOL chief Tim Armstrong on the ‘concerning’ Yahoo hack and how he’s convincing workers not to leave post-acquisition
    AOL chief Tim Armstrong on the ‘concerning’ Yahoo hack and how he’s convincing workers not to leave post-acquisition Business Insider - 2 hours 14 minutes ago

    John Lamparski/Getty Images AOL chief executive Tim Armstrong … Continued The post AOL chief Tim Armstrong on the ‘concerning’ Yahoo hack and how he’s convincing workers not to leave post-acquisition appeared first on Business Insider. … More »

  • German companies share success stories of their Malaysian ventures Business Times - 2 hours 17 minutes ago

    BERLIN: German companies have given the thumbs-up to the incentives rolled out by Malaysia, saying they have provided support to their investment story abroad. Jan J.Schmidt-Krayer, who is managing partner of Schmidt + Clemens, said the tax … More »

  • Germany blocks WhatsApp data transfers to Facebook AFP - 2 hours 19 minutes ago

    German data protection authorities on Tuesday said they had blocked Facebook from collecting subscriber data from its subsidiary WhatsApp, citing privacy concerns. Facebook and WhatsApp promised in the ... … More »

  • WTO cuts 2016 world trade growth forecast to 1.7 percent, cites wake-up call
    WTO cuts 2016 world trade growth forecast to 1.7 percent, cites wake-up call Reuters - 2 hours 19 minutes ago

    The World Trade Organization cut its forecast for global trade growth this year by more than a third on Tuesday, reflecting a slowdown in China and falling levels of imports into the United States. The new figure of 1.7 percent, down from the WTO's … More »

  • Schaeuble stirs interest rates debate ahead of Draghi visit
    Schaeuble stirs interest rates debate ahead of Draghi visit Reuters - 2 hours 24 minutes ago

    German Finance Minister Wolfgang Schaeuble called on Tuesday for urgent structural reforms to spur growth to end the era of low interest rates, a day before lawmakers will grill ECB President Mario Draghi about his loose monetary policy. In a guest … More »

  • Singapore urged to get tougher on money-laundering
    Singapore urged to get tougher on money-laundering AFP News - 2 hours 25 minutes ago

    Singapore must take more aggressive action against complex cross-border money-laundering including prosecuting individuals and seizing illicit proceeds, a global financial crimes watchdog said Tuesday. The Paris-based Financial Action Task Force … More »

 
Recent Quotes
Symbol Price Change % Chg 
Your most recently viewed tickers will automatically show up here if you type a ticker in the "Enter symbol/company" at the bottom of this module.
You need to enable your browser cookies to view your most recent quotes.
 
Sign-in to view quotes in your portfolios.

MARKET MOVERS

  • Most Actives
    Most Actives
    NamePriceChange% Chg
    0.141+0.003+2.17%
    N21.SI
    3.99+0.03+0.76%
    Z74.SI
    0.155+0.003+1.97%
    AFC.SI
    0.740.000.00%
    BS6.SI
    0.275+0.010+3.77%
    5ME.SI
  • % Gainers
    % Gainers
    NamePriceChange% Chg
    0.133+0.020+17.70%
    5PF.SI
    0.19+0.03+15.85%
    AWI.SI
    1.48+0.16+12.12%
    S91.SI
    0.198+0.020+11.24%
    M14.SI
    0.60+0.05+9.09%
    AZA.SI
  • % Losers
    % Losers
    NamePriceChange% Chg
    0.255-0.110-30.14%
    AZT.SI
    0.56-0.18-24.32%
    5VJ.SI
    0.395-0.070-15.05%
    K1Q.SI
    0.162-0.028-14.74%
    BGO.SI
    0.122-0.020-14.08%
    569.SI

Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    1.3597-0.0005-0.04%
    USDSGD=X
    1.5257-0.0046-0.30%
    EURSGD=X
    1.7649+0.0021+0.12%
    GBPSGD=X
    73.8180+0.094+0.13%
    SGDJPY=X
    5.7004+0.0011+0.02%
    SGDHKD=X
    3.0319-0.0023-0.08%
    SGDMYR=X
    9,524.7754-54.0469-0.56%
    SGDIDR=X
    4.9027+0.0009+0.02%
    SGDCNY=X
    1.0414+0.0028+0.27%
    AUDSGD=X
  • Commodities
    Commodities
    NamePriceChange% Chg
    1,332.60-11.50-0.86%
    GCZ16.CMX
    19.29-0.31-1.56%
    SIZ16.CMX
    93.06-1.39-1.47%
    ^XAU
    2.17-0.03-1.27%
    HGZ16.CMX
    43.85+0.41+0.94%
    CLV16.NYM
  • Bonds
    Bonds
    TreasuryYield (%)Yield Change
    1.10-0.03
    ^FVX
    1.55-0.04
    ^TNX
    2.28-0.05
    ^TYX