Investors and environmentalists alike find benefits with smart and sustainable investments, like these eco-friendly options that can make both the world and your IRA portfolio go green.
Go Green with These Eco Investments
Go Green Definition: An expression used to refer to the process of making more environmentally-friendly decisions.
1. Organic Farming and Sustainable Agriculture
The next farmer you meet years from now may have a master’s degree in finance. Wall Street is taking over farms due to the profitability as well as the predicted efficiency in the long run.
The rise of environmental consciousness puts organic farming high up in a state’s to-do list. Also, the growing priority for natural, healthy options gives organic farming the edge over more conventional farm processes.
These benefits come in the form of price premiums and consumer preference.
Sustainable agriculture is also becoming smarter and better, with the use of satellite technology as well as emphasis and support by government entities. Farmers and investors alike expect both lower expense ratios during production and higher profit margins due to the growing demand.
Sustainable agriculture offers not only food but also alternative sources of power, eco-friendly textiles, and even construction materials.
A self-directed IRA can accept agricultural real estate as an investment. Some IRAs with investments in sustainable agriculture can even get subsidies for higher profit margins, which is perfect for those who plan to retire with a more stable income stream.
While nothing is set in stone regarding the investment world, people will always eat and need biological resources for consumption.
2. Green Bonds
Making the world cleaner and earning profit may seem like a rare occurrence in the business world, but green bonds have helped capitalists and environmentalists work together. A Green Bond is just like any other corporate bond with an interest rate and a period when it expires.
The difference lies in the issuer, which can be any entity raising funds for projects that positively affect the environment.
The government is a big proponent of green bonds. The earliest recorded green bond is actually from San Francisco, California, where green bonds finance the use of renewable energy.
These climate bonds are seeing great growth. In fact, there is a 78% growth rate in the issuance of this debt instrument, which shows a growing interest in these debt investments.
According to a report from Reuters, the global green bonds market reached $155 billion in 2017, breaking estimates of $130 billion and showing tremendous growth from the $87.2 billion of 2016.
Most retirement portfolios, Traditional IRAs or self-directed ones, can accept bonds and debt investments.
The earlier the investment in green bonds, the higher the impact on the environment.
3. Environmentally-Friendly Real Estate
The shift of consumption to responsible and sustainable resources impacts the real estate industry as well. A Washington Post report shows that, on average, going green can add 3.6% to the price tag, with individual houses seeing 6% to 7.7% price increase for residential real estate.
The price increase given by sustainable features is not the only reason to go green. The ratio of green homes to non-green homes is decreasing.
In some areas in the country, there are 36 green homes for every 74 non-green homes. The numbers, as the real estate group Realtors reported, shows growing demand for, and acceptance of, green efficient housing.
The earlier a house goes green, the less costly the investment on sustainable features will be and the higher the profit margins. In fact, not going green can hurt real estate prices, as green homes are slowly becoming the norm.
By investing in green real estate properties, a self-directed IRA can future-proof itself. Attaching a solar panel or a water filtration and energy conservation systems add not only literal price value but also put a property ahead of the pack.
4. Sustainable Energy
Renewable energy is cheaper each year; costs in 2016 was at $19 billion in comparison to $26 billion in 2015. At the same time, renewable energy increased by 2%.
Investing in clean energy could potentially not only gives better returns with lower costs, but also it provides jobs. Green job openings on average grow 12 times higher than the national average.
5. Green Companies
Corporations with an environmental, social, and governance focus actually grow faster compared to traditional stocks, according to a Forbes review.
These companies make sustainable investing stable, as these corporations benefit both the planet’s environment and the retirement portfolios that invest in them.
Self-directed IRAs can invest in these green companies directly through common and preferred shares or indirectly through ETFs and mutual funds.
For the more advanced investors, diversifying to derivatives can add more potential but will require further research.
Around 2/3 of all US greenhouse gas emissions come from transportation. Moving both people and goods have an important role in an economy, but the costs run higher not just in dollars, but also in melting polar ice caps.
To make sure that we can live and retire in a world comfortable enough to live in, investing in eco-friendly transportation is a good way to diversify investments as well as help the world become a better place.
Self-directed IRAs can contribute to the fight against unnecessary and inefficient carbon and traditional transportation mode by investing in emerging green start-ups and blue-chip companies that are starting to be more socially aware.
7. The Sharing Economy
An emerging and growing business model, the sharing economy disrupts a lot of traditional businesses.
Airbnb made hotels more competitively priced, and Uber made transportation friendlier to pockets and the environment, as fewer cars move since seats are fully utilized.
The sharing economy is actually a green and eco-friendly sector. These businesses use fewer resources, as peers share services and products in a community.
Efficiency rises and with this growth in productivity comes lower expense ratio and higher profit margins.
Self-directed IRAs can grab a piece of this green pie by investing in start-ups and companies.
As long as the business model is peer-to-peer, the investing public sees the company as a sharing economy player.
8. Clean Technologies
A 2017 technological survey has shown that only a few countries and sectors are on track to meet low carbon standards. On the bright side, the percentage is growing, which means momentum is present.
The purpose of an IRA is to match and outgrow inflation and current growth models. Clean technologies are growing at a faster pace compared to traditional models.
This accelerated growth makes these companies involved in research and development of clean technologies attractive to portfolios.
While technology as a sector itself is complex, the idea for investing is simple; the company that efficiently innovates provides the best shareholder value.
Self-directed IRAs can benefit from diversifying in tech companies especially if there is a focus on environmental projects.
9. The Marijuana Industry
The marijuana industry is an emerging and growing sector.
The so-called green revolution gave marijuana a big jump in public perception, as more and more states accept medical use and entertainment consumption of marijuana.
A self-directed IRA can invest in marijuana stocks either through stocks or mutual funds with so-called weed companies.
As the demand for marijuana grows with more states legalizing its use, investors can surf the waves and give their portfolios the wonderful green color of profit and growth.
Investments do not just have to be purely capitalistic; in its essence, investing is here to help make society better.
Investors that go green with their IRAs provide needed capital for companies to grow.
At the same time, these socially responsible investments make the world a cleaner and safer place.
Investors can help to save the world, one small green investment at a time.
Do you have holdings in green companies? Are you planning to buy some green bonds? What other alternative investment vehicles do you know that helps make the world cleaner and safer? Let us discuss in the comments section below.