Everywhere I turn, it’s there.
No, not the balding spot on my head. But almost as bad.
It’s everywhere. The news. Instagram. The mountain that’s on fire across from my house. [True story]
How do we put it out?
I’ve spent the last 3 years looking at how everyday folks can align their investments with their values–and in turn, take on the world’s toughest challenges.
In my recent book, The Do-Gooder’s Guide to Investing, I wanted to show how money can be one of the big levers to help us solve climate change.
But if your money is sitting in an average bank account or investment fund, it could be supporting the exact things you’re fighting against.
Here’s a look at my favorite investments that will help solve climate change while growing your money.
Microfinance organizations make “micro” loans (typically $25-$100) to poor people around the world.
Most microfinance customers are women expanding small businesses. Drawdown’s solutions rate educating women among the Top 10 solutions to climate change. Microfinance has brought banking, expanded income, and empowerment to women around the world, often investing their new benefits in educating their young children.
You can invest in microfinance via:
- Working Capital for Community Needs (WCCN)
- Kiva.org (Although Kiva does not provide a financial return to you, I always mention them because I’ve used their platform to make microloans for the last 10 years and really love what they do.)
Wind and solar energy are now cheaper than diesel, nuclear, coal and in most cases natural gas. (Lazard’s 2017 Levelized Cost of Energy Analysis)
In 2019, Los Angeles Power & Water inked a deal to buy energy from a solar energy farm with battery storage—at half the cost of power from a new natural gas plant.
You already know that renewable energy is cleaner for our air and water. It generates way less CO2. And it has the potential to create well-paying jobs.
But other than installing your own solar panels, are you investing in renewable energy?
Here are my two go-to options for investing in renewable energy.
YieldCos are companies that own large renewable wind and solar farms. They also pay attractive dividends (cha-ching!) from the sale of their renewable electricity to utilities.
You can easily buy YieldCos in your investment account. They pay out dividends, between 3% and 9%. (I really like dividends because my money keeps growing even if the stock doesn’t go up). These companies are typically stable, too, because they have long-term contracts to sell their electricity.
My favorite YieldCos are Brookfield Renewable Partners (BEP), Next Era Energy (NEP), and TerraForm Power (TERP).
YieldCos are lesser-known investment options, but can generate positive investment returns while increasing our renewable energy capacity.
Renewable Energy ETFs
In The Do-Gooder’s Guide to Investing I explain why ETFs are the new black. ETFs are similar to mutual funds and allow you to invest in a wide range of stocks. (However, unlike mutual funds, which are one of the biggest scams in the investing world, ETFs have much lower fees, which will allow your money to grow even more over time.)
Here are four climate-focused ETFs that are focused on a low-carbon future:
- iShares MSCI ACWI Low Carbon Target ETF (CRBN) | When you invest in this ETF, you are investing in companies with “lower carbon exposure than that of the broad market.” This means companies with naturally lower energy needs or companies that actively manage and lower their carbon emissions. It invests in over 1,200 companies. Another similar fund is the SPDR® MSCI ACWI Low Carbon Target ETF (LOWC).
- SPDR® S&P 500 Fossil Fuel Free ETF (SPYX) | This ETF invests in the largest 500 companies in the U.S. minus companies that hold fossil fuel reserves. The investment thesis is betting that companies with fossil fuel reserves are in for a tough future. If you believe that, too, this investment could outperform in the years to come.
- ETHO Climate Leadership ETF (ETHO) | This ETF invests in companies that are leaders in “carbon impact,” which is measured by greenhouse gas emissions. This fund’s strategy is based on research that shows companies who are more carbon-efficient perform better than non-carbon efficient companies. The total of the companies in the Etho Climate Leadership Index have 85% fewer carbon emissions than the S&P 500.
- Guggenheim Solar ETF (TAN) | This ETF invests in companies involved in all solar technologies including crystalline and thin-film photovoltaic, the solar supply chain like solar farms and manufacturers, and inverters. This fund tracks an industry where predictions call for $4 trillion in new global electricity generation by 2030 to meet demand. With the cost of electricity from solar now lower than nuclear and coal, the solar industry is expected to grow. *This fund is historically more volatile, so be sure it fits your needs.
Clean Energy Credit Union
If you simply need a climate-friendly place to save your money, you can get a checking and savings account with Clean Energy Credit Union, which uses its funds to finance renewable energy, not coal plants or oil pipelines, like many large banks (JPMorgan Chase and Wells Fargo are two major banks). Amalgamated Bank is also a union-owned bank that is powered by 100% renewable energy.
If the DIY approach to investing intimidates you, have no fear. There are two options to help you align your money with your values:
1) Find a financial advisor who is aligned with your values and can help you get your investment strategy setup.
You can find a list of 38 advisors who have a sustainable focus in the free Investments Overview Spreadsheet (click on Advisors tab at bottom) I created for you.
2) Signup for a robo-advisor. One of my favorite sustainable robo-advisors is OpenInvest.
OpenInvest allows you to customize your portfolio by themes like:
- Divest from fossil fuel producers
- Reduce greenhouse gas emissions
- Fight deforestation
Although I typically recommend working with a human advisor so they can really understand your needs and desires, this is a great hands-off way to invest in reversing climate change.
If you are an experienced investor or want to get directly involved with young companies that can impact our future, you can invest directly in companies you like. It’s called angel investing. New regulations allow everyday investors to invest as little as $250 through equity crowdfunding platforms.
In 2017, I made my first angel investment. Along with 1,300 other investors, I helped put $1 million into SONDORS Electric Vehicles, a company building an affordable electric car.
Off-grid solar provider in the Democratic Republic of Congo, NovoMoto, is another low-carbon company that just raised $335,000 from the crowd.
Here are some examples of other world-changing companies that have raised money from angels and everyday investors like you. Here are a few examples:
- Everytable—Fresh, healthy, affordable fast food
- Farm from a Box—Off-grid technology for agriculture
- LPP Fusion—2 billion degree fusion generator that could replace fossil fuels
- Malibu Compost —First biodynamic bagged compost
- Blokable—High-performance modular homes
- Ganaz—App that connects farmworkers with the best farm jobs
I am a big proponent of supporting bold and innovative companies, because if we want to reverse climate change, we’re going to need bold new approaches to energy, transportation, housing, food, and more.
Your money is a powerful tool. I hope you’ll take a look at how it’s invested and find investments that supercharge your efforts toward solving climate change.
To spur the movement, I’ve challenged 1 million people to shift just $10,000 each into sustainable and responsible investments. That will be $1 BILLION dollars in change.
Almost $500,000 has been shifted in just the past few months because of this challenge. To take the challenge, check out the Do-Gooder $10K Challenge.
To a bright future,
Adrian Reif wrote The Do-Gooder’s Guide to Investing: Grow Your Money While Investing in Renewable Energy, Affordable Housing, Local Communities, and More to help everyday folks align their money and their values. It will show you how to earn more while making a greater impact, earn dividends from renewable energy, and create an investing strategy that grows in any market. It’s become a go-to resource for learning how to invest sustainably and responsibly. He’s also the founder of Incredible, an innovation studio that helps companies, foundations, and governments uncover new potential for social and environmental change.