Green Investing Guide

1. Get a stockbroker: For those who have never bought stock before, the first step is finding a stockbroker.⁵ The easiest way to do that is to sign up for a well-known broker online such as E-trade, Fidelity, or TD Ameritrade.⁶ Using the money you put into the account, the stockbroker will buy your stocks for you. You can also indirectly buy stock through exchange-traded funds, mutual funds, and investment clubs, which we'll get to in a little bit.

2. Prioritize Your Values: Now that you have the tools to buy stock, make a few rules to narrow down what companies you're willing to invest in. First, rule out industries you absolutely don't want to support for environmental or moral reasons. Second, pick out what environmental or social practices are the most important to you. Since very few businesses are 100% environmentally perfect, this strategy allows you to support companies that are taking the most pro-active steps towards sustainability. For more on prioritizing your green investments, check out the Greeniacs article on green investing.

3. Stay Informed: If you're going to be actively trading your stocks, you should probably stay up-to-date on financial news, especially in the green sector. Subscribe to a financial newspaper or financial news website. Here's a great website for news on the green sector.

1. Greenwashing: All corporations want to advertise their green credentials, but sometimes they're not as green as they make themselves out to be, otherwise known as “greenwashing.” That means your investment might be rewarding the wrong kind of practices. Most commonly, greenwashing companies advertise a single environmentally-friendly practice but still having an overall business plan that is bad for the environment. Be sure to research each environmental claim from the company to make sure it's not unsubstantiated or using false or misleading facts.⁷ Here's a list of the 10 worst greenwashing companies.

2. Risky Sectors: Although it's impossible to predict, certain sectors have a tendency to be highly fluctuating. Fuel cell technologies, for example, have frequently been overbought, creating volatile up-down cycles with the stock.⁸ Also, expect a greater risk with smaller, younger green businesses, since their stocks are more likely to either boom or bust.⁹ Of course, if you're really enthusiastic about a new technology or company or you've also invested in some safer investments, feel free to invest in these riskier sectors.

3. Not Diversifying: Although it might be tempting to research only 3 companies and invest all your money into them, even for less risky companies, this is a pretty risky move. Instead, you should be tracking between 15-25 stocks. If you don't have enough money for that, you should be mostly investing in mutual funds.¹⁰

1. Green Indexes: Green stock indexes are measures of businesses that have been certified for their degree of sustainability and strong financial outlook. You can use them to find solid green companies. Here's a sample of a few green indexes:
◦ Sustainable Business's Top 20 (SB20)
◦ Dow Jones' Sustainability Index (DJSI)
◦ Wilderhill Clean Energy Index (ECO)

2. Green Stock Lists: Many websites have much more comprehensive lists of sustainable companies, along with basic descriptions, which you can use as a starting point for doing your own research:
◦ EcoBusiness Links' Green Energy Stocks
◦ Newsweek's Green Ratings for the 500 largest US companies
◦ The Green Investment Guide (by sector)

3. CSR Reports: Although most major corporations usually aren't known for being environmentally friendly, they are a somewhat safer investment than many unknown smaller companies. Pick a few that you like. Then, to do more research on their sustainability efforts, take a look at their corporate social responsibility report. You can usually find these online at their website, and these detail the company's priorities.

1. Mutual funds: Mutual funds are basically a collection of stocks and bonds.¹² Some great green mutual funds are Neuberger Berman Socially Responsive (NBRSX), Winslow Green Growth (WGGFX), New Alternatives (NALFX), and Domini European PacAsia Social Equity (DUPFX).¹³

2. Exchange-traded funds: Exchange-traded funds, or ETF's, are basically mutual funds that trade based off of a particular index.¹⁴ For example, the ETF for ECO is PBW.¹⁵ Others include the Domini 400 Social Index (DSI), PowerShares WilderHill Progressive Energy Portfolio (PUW), and PowerShares Cleantech Portfolio (PZD).¹⁶

3. Investment Clubs: Investment clubs are similar to mutual funds, but with a lot less people. This allows an individual investor to have much more control of and input into the selection of businesses in which the club invests. If you want to make a green investment club, get a couple of your friends together and pool your money to invest in a bunch of green stocks. It's as simple as that!¹⁷

1. Green Bonds: Bonds are basically small units of government debt that pay interest. Green bonds are bonds that support government projects that help the environment. Although they're generally much lower risk than stocks, they also have a much smaller return.

2. Green Savings Accounts: Like regular bank accounts, green savings accounts are just money that you deposit in the bank. Banks that offer these will loan your money out to environmentally friendly businesses. The bank is basically doing all the work and taking all the risk of green investing for you.

3. Green Money Market Accounts: Similar to green savings accounts, money market accounts are basically bank accounts. They're better in that they offer higher interest rates, but worse in that they require a higher minimum investment balance and are limited to a certain number of withdrawals a month.

4. Green Certificates of Deposit: Similar to green bonds, green certificates of deposit are investments for a predetermined time, between a month and 5 years, with a fixed interest rate. Although interest rates can be higher than the other bank options, there is also a high penalty for withdrawing early from the account.¹⁸