Editor’s note: This column is part of InvestorPlace.com’s Ultimate Guide to ESG Investing.
Our climate change clock is ticking — literally.
The Climate Clock is a digital clock that displays the time the world has left to avoid a climate change catastrophe. It counts down the years, days, hours, minutes and seconds until the Earth’s carbon budget is depleted, based on data from the Mercator Research Institute on Global Commons and Climate Change.
These clocks are popping up across the globe. A ten-story version was on display in Manhattan’s Union Square as part of New York City’s Climate Week. At the end of September, the clock showed we have a little over seven years left until depletion.
Most of us by now are well aware of the challenge that climate change represents. However, from an individual perspective, it often seems like such a daunting problem to solve. Because of this, we tend to avoid it and move on with our day-to-day lives.
What Can We Do?
The global warming we’ve experienced over the last several decades has been caused, to a large degree, by human activities, most notably the burning of fossil fuels like coal, oil and gas. As such, there are a few things we can do as individuals. We can switch to 100% green power like solar, plant more trees, ride a bike when possible, get a hybrid or electric car, and generally just consume less stuff.
Additionally, we each can amplify our intention to positively address climate change through sustainable investing approaches that effectively fight the climate crisis.
Investments in this area can grow your money while funding climate change solutions.
How Can We Start Investing Consciously?
If you own individual stocks, you can focus on buying shares of companies whose policies and actions you support, including renewable energy and energy efficiency companies. Likewise, you can divest shares of companies whom you determine are negatively impacting the environment, like fossil fuel companies and those heavily dependent on fossil fuels. In addition, you can look for companies that will benefit indirectly from the movement to a low-carbon economy.
In terms of mutual funds and exchange-traded funds (ETFs), you can get a feel for their investing philosophy regarding environmental issues by examining their prospectuses and their records of how they voted with their portfolio companies. A quick way to find socially responsible mutual funds and ETFs is to peruse the “Sustainable, Responsible and Impact Mutual Fund and ETF Chart” from the Forum on Sustainable and Responsible Investment.
If you have an IRA or 401k plan, check to see if it offers a climate-friendly option. If not, you can ask your investment advisor or plan manager to make such options available.
When it comes to banks and credit unions, examine their mission statements, goals and objectives. Then, determine if responsible investing is a priority for them.
What About Impact Investing?
For those interested in taking a deeper dive into climate change impact investing, I would offer our “Head + Heart + Math” approach. We use this approach to evaluate companies’ environmental friendliness, as well as their financial viability. It’s an approach that even dedicated individual investors can use — not just impact-based holding companies like CoPeace.
It’s important to be extremely selective when choosing which impact-driven companies to invest in. You must ensure they have a sustainable business model and are making a measurable impact. “Head + Heart + Math” can be a highly sophisticated process, but individual investors can customize it to meet their needs. Here’s a high-level description:
Head: Identify potential companies with innovative, marketable concepts and a strong leadership team.
Heart: Target companies combating world problems with measurable impact.
Math: Critically analyze all potential targets through a series of economic models and financial projections focused on identifying positive growth and potential target returns.
How Can Impact Investing Help the World and My Portfolio?
Governments and companies across the globe are increasingly feeling pressure to change behaviors that are contributing to the climate crisis. Those groups finding solutions to climate change, or mitigating its effects, will be part of the growth market.
Climate change represents a systemic risk to the long-term performance of your portfolio. Fortunately, research is revealing that social and environmental impact investments — driven by ESG investing data — are performing as well. In many cases, they are actually performing better than traditional investments.
You don’t have to sacrifice the performance of your portfolio in order to be true to your personal values and make a difference in climate change.
Climate change is real. It is negatively impacting our planet and our people. We are all bound together on this big blue ball we call Earth. In effect, whether or not we always realize it, we’re teammates in the game of life.
As Martin Luther King, Jr. said, “We are caught in an inescapable network of mutuality, tied in a single garment of destiny. Whatever affects one directly, affects all indirectly.”
On the date of publication, Craig Jonas did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Craig Jonas, CEO of CoPeace, is a lifelong entrepreneur with success across business, academic, and athletic industries. He has over 30 years of experience in management with a passion for teambuilding and drawing individuals with big ideas together.