How to invest in the environment

Make your retirement savings work for you — and the planet.

Photo by oldskool photography on Unsplash

Our planet is worth saving — but it can be difficult to figure out how we, as individuals, can make a difference.

There’s already a lot of good resources for taking political action and making lifestyle changes like biking instead of driving and eating less meat — but there’s a third weapon in our arsenal: eco-forward investing. Investing money you already have in companies that care about the environment.

(Want to get straight to the strategy? See the 60 second guide at the bottom)

Why Eco-Friendly Investing?

This approach is beautiful for so many reasons:

  1. It only takes a few minutes to set up, but pays eco-dividends for the rest of your life.
  2. Anyone with savings can help, at no additional cost.
  3. It uses free market capitalism as a force for good rather than evil.
  4. Companies that care about the environment will outperform those destroying it (see: coal is on the decline, renewable jobs are skyrocketing)

Excited yet?

Eco-Smart Index Funds

First, a quick personal finance lesson: Index funds are stocks that represent a collection of stocks. For example, if you buy a share of SPY, an index fund that tracks the S&P 500, you own a tiny slice of the 500 largest companies in the US. Finance experts agree that investing in index funds with low fees is the best investing strategy, far better than picking individual stocks.

Most index funds you’ve heard of (such as the S&P 500) don’t care about the environment, instead investing in companies that have historically performed well (often the companies that have destroyed the planet to boost their bottom line). Thankfully, there are a lot of new index funds that exclude the worst polluters, or even specialize in green-forward companies.

With that explained, let’s get investing!

The best place to start is SPYX. Why? It’s the S&P 500 — minus companies with known fossil fuel reserves. So you’re still invested in the US economy as a whole, you’re just saying no to the worst offenders. Which is a smart move, since many people are starting to withdraw their investments from fossil fuel companies. (see: Norway just sold $6 billion of gas and oil shares)

Other eco-smart options include:

  • ICLN, global renewable energy index fund with a strong dividend.
  • SUSA, socially responsible US companies.
  • CRBN, global companies with lower than average carbon footprints.

The 60 second guide to eco-forward investing

  1. Create a brokerage account (I recommend Robinhood)
  2. Sell any existing stock you own in non-retirement accounts
  3. Buy roughly equal amounts of SPYX, ICLN, SUSA and CRBN
  4. Bonus: Set up repeating deposits to continually increase your savings— and make a bigger positive impact on the environment
  5. Bonus: Read about the Business of Electric Vehicles to identify more opportunities to fund & profit from the green revolution

Concerned that change is already happening, and want to prep your portfolio for the crisis? Read my guide on Investing in the Age of Climate Change.

Want to use your money for a more direct impact? Consider donating to an organization like Citizen’s Climate Lobby that’s working to build bi-partisan support for carbon fee and dividend legislation.

Technology, Entrepreneurship and Design to make the planet a better place. Pittsburgh, PA.

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