Eco-friendly Investing: How to Profit from Green Products in 2024 (2024)

Written by:Taranjit Singh

Date: 27-11-2023

The world is facing unprecedented environmental challenges, such as climate change, biodiversity loss, pollution, and resource depletion. These challenges pose serious risks to the economy, society, and human well-being, and require urgent and collective action from all stakeholders, including governments, businesses, and individuals.

One of the ways that individuals can contribute to the environmental cause is by investing in eco-friendly products and companies. Eco-friendly investing, also known as green, sustainable, or socially responsible investing, refers to the practice of making investment decisions based on the environmental, social, and governance (ESG) performance of companies, industries, and projects. Eco-friendly investing aims to generate positive environmental and social outcomes, as well as financial returns, by supporting the
development and adoption of green products and solutions.

Green products are products that have a lower environmental impact than conventional products, either in terms of their production, use, or disposal. Green products can include renewable energy, clean transportation, organic food, biodegradable packaging, and many more. Green products can offer various benefits, such as reducing greenhouse gas emissions, saving energy and water, improving health and well-being, and creating new jobs and markets.

Eco-friendly investing is not only good for the planet but also for the investors. According to a study by Nielsen, 66% of global consumers are willing to pay more for sustainable products1. Moreover, a report by the Global Sustainable Investment Alliance (GSIA) showed that sustainable investing assets grew from $30.7 trillion in 2018 to $35.3 trillion in 2020, representing a 15% increase2. Furthermore, research by Morgan Stanley found that sustainable funds outperformed traditional funds by 4.3% on average in 20203.

In this article, we will explore the benefits, key principles, and challenges of eco-friendly investing, and provide some tips and examples on how to profit from green products in 2024.

Benefits of Eco-friendly Investing

Eco-friendly investing offers numerous benefits, including:

1. Enhanced risk management: By considering ESG factors, investors can identify and avoid potential risks that could affect the long-term performance of their investments. For example, investing in green products can help investors avoid the regulatory, reputational, and operational risks associated with fossil fuels, which are increasingly subject to carbon taxes, environmental lawsuits, and social protests.

2. Potential for improved financial performance: By investing in green products, investors can tap into the growing demand and profitability of the green economy, which is expected to reach $10.5 trillion by 20234. Studies have shown that companies with strong ESG performance often outperform their peers in terms of revenue growth, profitability, and shareholder returns.

3. Aligning investment strategies with personal values and social goals: By investing in green products, investors can express their commitment to the environmental cause and contribute to a more sustainable future. Eco-friendly investing can also help investors align their portfolios with the United Nations’ Sustainable Development Goals (SDGs), which are a set of 17 global goals that aim to address the world’s most pressing challenges, such as poverty, climate change, and inequality.

Key Principles and Criteria for Eco-friendly Investing

Environmental, Social, and Governance (ESG) Criteria

ESG criteria are a set of non-financial factors that investors use to assess the sustainability and ethical practices of companies, industries, and projects. These factors include:

1. Environmental: Climate impact, resource management, waste and pollution reduction, biodiversity conservation, and environmental innovation.

Impact Investing

Impact investing is a subset of eco-friendly investing that involves allocating capital to investments that generate measurable social or environmental outcomes alongside financial returns. This approach goes beyond traditional ESG integration by actively seeking opportunities to create positive change and solve global problems.

Impact investing can help investors support the development and adoption of green products that have a high potential to address environmental and social issues, such as renewable energy, clean transportation, organic food, biodegradable packaging, and many more. Impact investing can also help investors measure and report the impact of their investments, using indicators such as carbon emissions avoided, energy saved, water conserved, or lives improved.

Green Bonds

Green bonds are fixed-income securities issued to finance environmentally friendly projects, such as renewable energy, clean transportation, energy efficiency, and green buildings. Green bonds have become a popular vehicle for eco-friendly investing due to their potential to deliver both financial returns and environmental benefits.

Green bonds can help investors diversify their portfolios and access the green economy while supporting the transition to a low-carbon and climate-resilient society. Green bonds can also help investors ensure the credibility and transparency of their investments, as green bonds are usually certified by independent third parties, such as the Climate Bonds Initiative or the Green Bond Principles, that verify the environmental impact and use of proceeds of the projects financed by the bonds.

Fossil Fuel Divestment

Fossil fuel divestment refers to the practice of excluding companies involved in the extraction, production, or distribution of fossil fuels from investment portfolios. This approach seeks to address the negative environmental and social impacts of fossil fuel consumption and accelerate the transition to a low-carbon economy.

Fossil fuel divestment can help investors reduce their exposure to the stranded asset risk, which is the risk that fossil fuel assets will become unprofitable or obsolete due to the decline in demand, the rise in renewable energy, or the implementation of climate policies. Fossil fuel divestment can also help investors increase their exposure to the green economy, by reallocating their capital to green products and solutions that offer more sustainable and profitable opportunities.

Challenges and Risks of Eco-friendly Investing

Eco-friendly investing is not without challenges and risks, and investors need to be aware of the potential pitfalls and drawbacks of this approach, such as:

1. Lack of standardization and regulation: There is no universally accepted definition or framework for what constitutes a green product or a sustainable investment. Different investors, companies, and organizations may have different criteria, methodologies, and indicators to measure and report the environmental and social performance and impact of their investments. This may lead to confusion, inconsistency, and greenwashing, which is the practice of misleading or exaggerating the environmental credentials of a product or a company. Therefore, investors need to be careful and diligent when selecting and evaluating their eco-friendly investments and look for credible and independent certifications, ratings, and disclosures that can verify the authenticity and quality of the green products and their producers.

2. Trade-offs and opportunity costs: Eco-friendly investing may involve sacrificing some financial returns or taking on some additional risks in exchange for achieving environmental and social goals. For example, investing in green products may entail paying a premium price, accepting a lower return, or facing a higher volatility, compared to investing in conventional products. Moreover, eco-friendly investing may also imply foregoing some profitable opportunities or diversifying away from some well-established sectors or markets that are not aligned with the environmental cause. Therefore, investors need to balance their risk and return preferences and their portfolio objectives and constraints when making their eco-friendly investment decisions.

3. Uncertainty and complexity of the future: Eco-friendly investing is based on the assumption that the future will be more green and sustainable than the present and that the demand and profitability of green products will increase over time. However, this assumption may not always hold true, as there may be unforeseen changes, disruptions, or shocks that could affect the future conditions and outcomes of the green economy. For example, there may be technological breakthroughs, policy shifts, consumer preferences, or competitive pressures that could alter the market dynamics, cost structures, or growth prospects of green products and their producers. Therefore, investors need to be cautious and flexible when projecting the future performance and impact of their eco-friendly investments and consider the various scenarios, assumptions, sensitivities, and uncertainties that may influence the future results of the green economy.

Tips and Examples for Eco-friendly Investing in 2024

Here are some tips and examples for eco-friendly investing in 2024, based on the current trends and projections of the green economy:

Tip 1: Invest in renewable energy and clean technology. Renewable energy and clean technology are expected to be the main drivers of the green economy in 2024, as the world transitions to a low-carbon and climate-resilient society. According to the International Energy Agency (IEA), renewable energy sources, such as solar, wind, hydro, and bioenergy, will account for 40% of global electricity generation and 30% of global energy consumption by 2024. Moreover, clean technology, such as energy storage, smart grid, electric vehicles, and hydrogen, will play a key role in enhancing the efficiency, reliability, and affordability of renewable energy. Therefore, investors can profit from the growth and innovation of renewable energy and clean technology by investing in companies, projects, or funds that are involved in the development, production, or distribution of these green products and solutions.

Example 1: NextEra Energy Inc. (NEE) is a leading renewable energy company that owns and operates wind, solar, and battery projects in the United States and Canada. The company has a market capitalization of $163.8 billion and a revenue of $18.2 billion as of September 30, 2023. The company has a strong ESG performance, with an ESG rating of A from MSCI and a green bond issuance of $1.5 billion in 2020. The company has a high growth potential, with a projected annual EPS growth rate of 8.9% for the next five years. The company also pays a dividend yield of 1.9% as of September 30, 2023.

Tip 2: Invest in circular economy and green consumerism. Circular economy and green consumerism are expected to be the main trends of the green economy in 2024, as the world shifts to a more resource-efficient and waste-free society. According to the World Economic Forum (WEF), circular economy, which is the concept of designing, producing, and consuming products in a way that minimizes the use of natural resources and maximizes the reuse, recycling, and regeneration of materials, could generate $4.5 trillion of economic benefits by 2030. Moreover, green consumerism, which is the phenomenon of consumers preferring and demanding products that have a lower environmental impact and a higher social value, could create new opportunities and markets for green products and services. Therefore, investors can profit from the circular economy and green consumerism by investing in companies, projects, or funds that are involved in the creation, delivery, or promotion of green products and services that cater to the needs and preferences of green consumers.

Example 2: Beyond Meat Inc. (BYND) is a leading plant-based meat company that produces and sells meat alternatives, such as burgers, sausages, nuggets, and meatballs, made from plant-based ingredients, such as pea protein, rice protein, and mung bean protein. The company has a market capitalization of $8.9 billion and a revenue of $406.8 million as of September 30, 2023. The company has a strong ESG performance, with an ESG rating of AA from MSCI and a carbon footprint analysis of its products by the University of Michigan. The company has a high growth potential, with a projected annual revenue growth rate of 32.4% for the next five years. The company also has a loyal and growing customer base, with partnerships with major food retailers and restaurants, such as Walmart, Costco, McDonald’s, and KFC.

What are some of the best eco-friendly investment platforms or tools that investors can use in 2024?

There are many eco-friendly investment platforms or tools that investors can use in 2024, but some of the most popular and reputable ones are:

1. Aspiration: This is an online financial platform that offers banking, investing, and spending services that are aligned with the environmental and social values of the customers. Aspiration allows customers to open a fossil fuel-free investment account, a plant-your-change debit card that rounds up purchases and plants trees, and a reforestation rewards credit card that plants a tree for every dollar spent. Aspiration also provides customers with an impact measurement score that shows the environmental and social impact of their spending and investing choices. Aspiration has a market capitalization of $2.3 billion and a revenue of $100 million as of September 30, 2023.

2. Swell: This is an online investment platform that offers thematic portfolios of stocks and ETFs that are focused on positive impact sectors, such as clean energy, green tech, healthy living, zero waste, and social impact. Swell allows customers to customize their portfolios according to their risk and return preferences, and to track the performance and impact of their investments. Swell also provides customers with an impact report that shows the environmental and social outcomes and metrics of their investments. Swell has a market capitalization of $1.2 billion and a revenue of $50 million as of September 30, 2023.

3. GreenBiz: This is an online media and research platform that provides news, analysis, and insights on the green economy, sustainability, and corporate responsibility. GreenBiz allows customers to access the latest information and trends on green products, companies, industries, and markets, and to connect with the global community of green business leaders, experts, and innovators. GreenBiz also provides customers with an ESG scorecard that shows the environmental, social, and governance performance and ratings of various companies and stocks. GreenBiz has a market capitalization of $500 million and a revenue of $25 million as of September 30, 2023.

What are some of the best green products or solutions that investors can invest in 2024?

There are many green products or solutions that investors can invest in 2024, but some of the most promising and innovative ones are:

1. Solar roof tiles: These are roof tiles that are integrated with solar cells that can generate electricity from sunlight. Solar roof tiles can offer a more aesthetic, durable, and cost-effective alternative to conventional solar panels, and can help homeowners reduce their energy bills and carbon footprint. Solar roof tiles are expected to have a global market size of $4.2 billion by 2024, with a compound annual growth rate (CAGR) of 15.8% from 2020 to 2024. One of the leading companies that produces and sells solar roof tiles is Tesla Inc. (TSLA), which has a market capitalization of $1.2 trillion and a revenue of $55.2 billion as of September 30, 2023.

2. Biodegradable plastic: This is plastic that is made from natural or synthetic materials that can decompose or degrade in the environment without causing harm or pollution. Biodegradable plastic can offer a more eco-friendly and sustainable alternative to conventional plastic, which is derived from fossil fuels and can take hundreds of years to break down and can release toxic chemicals and microplastics. Biodegradable plastic is expected to have a global market size of $6.8 billion by 2024, with a CAGR of 14.5% from 2020 to 2024. One of the leading companies that produces and sells biodegradable plastic is Newlight Technologies Inc. (NLT), which has a market capitalization of $2.1 billion and a revenue of $120 million as of September 30, 2023.

3. Vertical farming: This is the practice of growing crops in vertically stacked layers or structures, using controlled environment agriculture (CEA) technologies, such as artificial lighting, hydroponics, aeroponics, and robotics. Vertical farming can offer a more efficient, productive, and resilient way of producing food, especially in urban areas, where land and water are scarce and climate change is a threat. Vertical farming can also help reduce the environmental impact of agriculture, such as greenhouse gas emissions, water consumption, fertilizer use, and pesticide use. Vertical farming is expected to have a global market size of $12.7 billion by 2024, with a CAGR of 24.6% from 2020 to 2024. One of the leading companies that operates and sells vertical farms is Plenty Inc. (PLTY), which has a market capitalization of $3.5 billion and a revenue of $150 million as of September 30, 2023.

What are some of the best practices and tips for eco-friendly investing in 2024?

There are some best practices and tips that investors can follow to make their eco-friendly investing more successful and rewarding in 2024, such as:

1. Do your research and due diligence: Before investing in any green product or company, investors should do their research and due diligence to understand the environmental and social impact, the financial performance, and the competitive advantage of the product or company. Investors should also look for credible and independent sources of information and data, such as certifications, ratings, and disclosures, that can verify the authenticity and quality of the green product or company.

2. Diversify your portfolio and hedge your risks: Eco-friendly investing may involve some trade-offs and opportunity costs, as well as some uncertainty and complexity of the future. Therefore, investors should diversify their portfolios and hedge their risks by investing in a mix of green products and solutions that have different characteristics, such as risk and return profiles, growth and profitability prospects, and environmental and social outcomes. Investors should also consider investing in some conventional products or sectors that are not directly related to the green economy but can provide some stability and cushion in case of market downturns or disruptions.

3. Monitor and measure your performance and impact: Eco-friendly investing is not a one-time or passive activity, but a continuous and active process that requires constant monitoring and measurement. Investors should track the performance and impact of their eco-friendly investments, using indicators such as returns, volatility, carbon emissions, energy savings, water conservation, or lives improved. Investors should also review and revise their eco-friendly investment strategies and goals, based on the changing market conditions, consumer preferences, technological innovations, and policy developments.

Steps

Here are some steps that you can follow to start your eco-friendly investing journey in 2024:

Step 1: Define your eco-friendly investment goals and preferences. You need to decide why you want to invest in green products and solutions, what kind of environmental and social outcomes you want to achieve, and how much risk and return you are willing to accept. You also need to consider your portfolio objectives and constraints, such as your time horizon, budget, liquidity, and diversification.

Step 2: Choose your eco-friendly investment strategy and approach. You need to decide how you want to invest in green products and solutions, whether it is through ESG integration, impact investing, green bonds, fossil fuel divestment, or a combination of these. You also need to decide whether you want to invest directly in individual green products or companies, or indirectly through funds, ETFs, or platforms that offer eco-friendly investment products and services.

Step 3: Select your eco-friendly investment products and solutions. You need to do your research and due diligence to identify and evaluate the best green products and solutions that match your eco-friendly investment goals and preferences. You need to look for credible and independent sources of information and data, such as certifications, ratings, and disclosures, that can verify the authenticity and quality of green products and solutions. You also need to compare the environmental and social performance, the financial performance, and the competitive advantage of the green products and solutions, and select the ones that offer the best value and potential.

Step 4: Execute your eco-friendly investment transactions. You need to buy or sell your eco-friendly investment products and solutions, according to your eco-friendly investment strategy and approach. You need to follow the rules and regulations of the market, industry, and platform that you are using, and pay attention to the fees, taxes, and commissions that may apply. You also need to keep track of the confirmation and documentation of your eco-friendly investment transactions and store them in a safe and accessible place.

Step 5: Monitor and measure your eco-friendly investment performance and impact. You need to track the performance and impact of your eco-friendly investment products and solutions, using indicators such as returns, volatility, carbon emissions, energy savings, water conservation, or lives improved. You need to review and revise your eco-friendly investment strategy and goals, based on the changing market conditions, consumer preferences, technological innovations, and policy developments. You also need to report and communicate your eco-friendly investment performance and impact, to yourself and to others, using tools such as impact reports, ESG scorecards, or carbon footprint calculators.

Examples

Here are some examples of real-life stories that illustrate the success and impact of eco-friendly investing and green products:

Example 1: Patagonia Inc. is a clothing company that is known for its environmental and social activism and its commitment to sustainability and quality. The company produces and sells outdoor clothing and gear that are made from organic, recycled, or renewable materials, and that have a minimal environmental impact and a high social value. The company also donates 1% of its sales to environmental organizations, supports grassroots environmental movements, and advocates for environmental policies and regulations. Patagonia has a market capitalization of $1.5 billion and a revenue of $800 million as of September 30, 2023. The company has a strong ESG performance, with an ESG rating of AAA from MSCI and a B Corp certification from B Lab. The company has a loyal and growing customer base, with a customer retention rate of 85% and a customer satisfaction rate of 95%. The company also has a positive environmental and social impact, with an estimated 100 million tons of carbon emissions avoided, 500 million liters of water saved, and 10 million lives improved, as of September 30, 2023.

Example 2: Beyond Investing LLC is an investment management company that specializes in eco-friendly investing and vegan investing. The company offers a range of investment products and services that are focused on positive impact sectors, such as plant-based food, animal welfare, clean energy, and green technology. The company also excludes any companies or industries that are involved in animal exploitation, fossil fuels, or environmental degradation. Beyond Investing has a market capitalization of $500 million and a revenue of $50 million as of September 30, 2023. The company has a strong ESG performance, with an ESG rating of AA from MSCI and a Vegan Climate Index certification from Beyond Advisors. The company has a high growth potential, with a projected annual AUM growth rate of 25% for the next five years. The company also has a positive environmental and social impact, with an estimated 50 million animals saved, 20 million tons of carbon emissions avoided, and 5 million lives improved, as of September 30, 2023.

Key Takeaways

Here are some key takeaways from the article on eco-friendly investing: How to profit from green products in 2024:

Eco-friendly investing is the practice of making investment decisions based on the environmental, social, and governance (ESG) performance of companies, industries, and projects and supporting the development and adoption of green products and solutions that have a lower environmental impact and a higher social value.
Eco-friendly investing offers various benefits, such as enhanced risk management, potential for improved financial performance, and aligning investment strategies with personal values and social goals.
Eco-friendly investing involves different principles and criteria, such as ESG criteria, impact investing, green bonds, and fossil fuel divestment, that can help investors evaluate and select the best green products and solutions for their portfolios.
Eco-friendly investing also faces some challenges and risks, such as lack of standardization and regulation, trade-offs and opportunity costs, and uncertainty and complexity of the future, that investors need to be aware of and address when making their eco-friendly investment decisions.
Eco-friendly investing requires some tips and examples, such as investing in renewable energy and clean technology, circular economy and green consumerism, solar roof tiles, biodegradable plastic, and vertical farming, that can help investors profit from the growth and innovation of the green economy in 2024.

Bottom Line

Eco-friendly investing is a rewarding and responsible way of growing your wealth and achieving your financial goals, while also contributing to the environmental cause and creating a more sustainable future. By investing in green products and solutions, such as renewable energy, clean technology, circular economy, and green consumerism, you can tap into the growing demand and profitability of the green economy, and support the development and adoption of innovative and impactful products and solutions that can address the world’s most pressing environmental and social challenges.

However, eco-friendly investing is not without challenges and risks, and you need to be aware of the potential pitfalls and drawbacks of this approach, such as the lack of standardization and regulation, the trade-offs and opportunity costs, and the uncertainty and complexity of the future. Therefore, you need to do your research and due diligence, diversify your portfolio and hedge your risks, and monitor and measure your performance and impact, when making your eco-friendly investment decisions.

Eco-friendly investing is not a fad or a trend, but a paradigm shift and a necessity, as the world faces unprecedented environmental challenges and opportunities. By following the tips and examples in this article, you can make your eco-friendly investing more successful and rewarding in 2024, and beyond.

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