Investing in Sustainable Cleantech Companies
When we say “sustainable” we almost always refer to “environmentally sustainable”. But companies must have sustainable business models to survive and flourish as well. One tried-and-true method for spurring on sustainable businesses is by tapping into the power of the financial markets.
Sustainable Investing… Does it Make a Difference?
Financial instruments such as stocks and mutual funds are the component parts of markets. Aggregate amounts of investment from people like you and me will move the stock price up and down; a company’s stock price is all based on the supply and demand for investment.
Therefore, many people investing in a company’s stock, thereby driving up the price, sends a signal to the CEO to continue taking the company in the current direction. The same logic applies if the stock drops — the CEO will make a change. CEOs actually work for shareholders and are bound by something known as “fiduciary duty” to serve the interests of investors.
Benefits of Socially Responsible Investing
Stock price fluctuations send another important signal to entrepreneurs. Money is the lifeblood of business and people will follow where the money goes. Entrepreneurs look at markets for guidance when contemplating the next business to start. As more people invest in existing cleantech companies, more entrepreneurs are incentivized to create new cleantech companies.
Tesla, for example, has been able to harness the power of the stock market to scale and accelerate its business. The company has been in the spotlight on a global stage and new electric vehicle (EV) companies have cropped up seeking to follow Tesla’s path to success.
Check out Tesla’s stock chart from 2012 to 2018 below juxtapositioned to the number of EV companies in existence:
Eco Investing
There are myriad ways to make environmental progress through investment. If you already have a portfolio of investments, you can divest from any mutual funds that hold fossil fuel stocks or that have invested in companies that do not take measures to address climate change. This strategy is generally known as Socially Responsible Investment or SRI.
A tool called Fossil Free Funds can help you check if any part of your investments is going towards unsustainable companies.
If you don’t already have investments, using something called a “Robo-Advisor” can be a simple first step to create a sustainable portfolio. Companies like Vestive create a diversified investment strategy according to the impact you want to make and then manage your investments in sustainable companies to maximize your profit.
This type of investing is often referred to as “impact investing” that can help spur new industries such as plant-based meat and EVs.
ACT ON CLIMATE
It’s time to put your money where your mouth is! Get involved with sustainable investing today by filling out Vestive’s few easy steps beginning with questions about your impact investing goals:
Originally published at https://cleantechrising.com on August 22, 2019.
