A "clean" portfolio prioritizes investing in sustainable and socially conscious organizations. While impact investing is bigger than ever, it's also a somewhat subjective concept that can be fine-tuned to cater to what's most important to you.
Women have always been at the forefront of clean or sustainable investing, leading the way in impact investing long before it became trendy. While the reasons for this focus certainly vary by investor, many women find themselves driven by a greater sense of social responsibility and a need to help others. A recent survey of clients conducted by investment firm RBC Wealth Management found that 74% of women expressed interest in increasing their socially conscious investments, compared to 53% of men.
Now, clean and sustainable investing is a booming market with enviable returns. And as millennial and Generation Z women express a greater interest in social investing than Gen X or baby boomers, the industry is only expected to grow. For good reason: A Morningstar report showed that, in 2018, sustainable funds performed better than overall funds.
Creating a "clean" investment portfolio is a way to put your money to work in a way that will be both beneficial to you and a more significant cause. To get started, you first need to identify what "clean" means to you and which methods you want to use to get there. Here is everything you need to create a sustainable investment portfolio.
What is a "clean" investment portfolio?
Do you want to support companies that create positive environmental change with their product? Or do you care more about companies that have eco-friendly policies and resource-saving practices, even if their product isn't environmentally related? It's possible to create a portfolio that includes either of these desires — or both.
You can even start your social investing by thinking about companies and industries you don't want to support. Things like weapons, fossil fuels, or tobacco might be red lines for you. By screening out these companies, you can start narrowing in on what you do want to support.
What clean investing metrics should I consider?
If you're looking to buy individual stocks, you can research stock indexes that align with what you believe. For example, the WilderHill Clean Energy Index follows companies that are involved in clean energy.
If you're choosing a mutual fund, ask for their complete list of companies. Their fact sheet often only shows you their top 10 holdings; seeing all the companies they invest in gives you a clearer idea of what they value.
What else can I do to be a clean investor?
It can be challenging to create a balanced yet clean investment portfolio, and there are other ways to support sustainable causes. Depending on what companies you already invest in, you may have a say in that company's practices. You can sometimes utilize shareholder activism to influence these businesses to go greener.
If you're having trouble finding companies you believe in, consider microfinancing green start-ups. You can find start-ups either through your network or microfinancing platforms.
It will take some research to make your investment portfolio truly "clean," but it's usually worth it to know that your investments are reflecting your values.