Put Your Money Where it Matters
Save the environment or invest for retirement?
What if you could do both at the same time?
Research suggests you can. In fact, investing responsibly may be among the best ways individuals can tackle climate change.
A study conducted by an insurance and responsible investing company found that changing how your pension or retirements funds are invested is
21x
more effective in reducing your carbon footprint than the combined effort of switching from air to rail travel, eating only a vegetarian diet, and using only green energy providers (Aviva, 2021).
This is because your investments may include fossil fuel companies and big banks that lend money to build oil and gas pipelines, extract fossil fuels, and fund construction of new coal burning power plants. When you invest in companies, you’re raising their stock price making it easy for them acquire financing for these types of projects. Instead, you can choose green investments.
Sustainable investing, also known as responsible investing, takes a more active look at what types of companies are available and then chooses companies that meet certain sustainability or social criteria.
Individual investors can think about investing according to their values, commonly termed “values-aligned investing.” You can invest in what matters to you, for example: environmental sustainability and addressing climate change, reducing poverty, safe work environment, and human and labor rights. If you did so, you’d be in good company because, “almost 70% of millennials would choose to invest in companies with positive sustainability elements even if that means 5% lower return on investment,” according to the Wall Street Journal. While millennials may be willing to make that trade-off, research on responsible investing (RI) suggests that it may not be necessary and that RI could actually be more profitable (Unruh et al, 2016).
Investing can be thought of as a way to reward ‘good’ companies and to support companies that hold similar social values (Allianz, 2019). As explained above, buying a company’s stock increases their share price which means they can more easily access capital to invest in new projects, so by investing in sustainable or socially-responsible companies, you’re enabling their efforts. Also, being a stockholder means being a part owner of the company, so you can exert your voice through shareholder proposals, votes, and annual meetings.
Bottomline, know what matters to you — what your values are. Then, put your money in companies that:
✔️ Don’t harm the environment
✔️ Pay women and people of color equally
✔️ Care about working conditions and workers’ rights
✔️ Are committed to reducing poverty and creating healthy communities
Your money can make a difference; it’s up to you to decide how to save, spend, and invest it.
