It's Getting Easier and Easier to Invest Money Without Wrecking the Planet
If midterms don't break your way, consider buying some stock.
Bitcoin is bad for the environment. Possibly very bad, according to a wild new study out this week that suggests that the emissions from bitcoin mining (“mining” requires electricity to run massive computer systems) could be sufficient to raise the average global temperature by 2 degrees in 22 years. “Are we really going to burn up the world for libertarian nerd bucks?” wondered climate journalist Eric Holthaus.
In 2017 alone, for example, the computing demands of bitcoin mining led to about 69 million metric tons of carbon dioxide emissions, according to the researchers’ calculations. 2017 was obviously an exceptional year, one where the bubble drove atmospheric interest in an industry that is still incredibly new and experiencing growing pains (and indeed, other researchers have already criticized the study for using 2017 to extrapolate emissions data).
And yet, the finding illuminates the incredible tension between commerce and the environment, and the extent to which investing our money in even forward-looking ways can lead to unforeseen environmental consequences. Fortunately, that’s starting to change, Andrei Cherny, whose financial services company Aspiration offers “banking and investing that puts you, your conscience and the planet first,” tells Inverse.
Not to make generalizations here, but broadly speaking capitalism has not been kind to mother earth. It’s lifted a billion or so people out of poverty, but, wouldn’t you know it, those people are very interested in things like eating meat, driving cars, installing air-conditioners, and other very climate-destroying activities.
Participating in the economy and taking care of our future selves without being too complicit in planetary destruction is, unsurprisingly, of great interest to young folks in particular. Cherny tells Inverse that this has fortunately gotten a lot easier, particularly in the last 20 years.
“The biggest challenge for sustainable investing has been this mindset that if you’re investing in ways that are good for the planet and for people, you’re giving up on profits,” Cherny explains. “That’s a misnomer. There’s been such a huge and developing body of evidence that shows that if you’re doing sustainable investing the right way, you’re actually investing in companies that are going to do better in the long run.”
It’s a fairly counter-intuitive idea: The more money you spend paying workers fairly or keeping your carbon footprint down, the less there is to pay out to investors. But, Cherny’s right that there is a growing body of evidence suggesting that the conventional thinking misses the mark. Thinking about how the planet will change and how that will effect your business is, after all, a sign that a company is forward thinking in other ways.
A 2014 report from the non-profit CDP, for example, estimates that companies on the S&P 500 with climate action plans perform about 18 percent better than ones that don’t, according to return on investment, a popular metric for assessing investments, per a report by The Guardian from the time. A 2017 report from the consultants at Boston Consulting found something similar, with companies that behave more ethically posting higher profits and carrying greater valuations. The Harvard Business School professor George Serafeim estimates that if you invested a $1 in 1993 in firms that perform well on sustainability metrics, you’d have $28 by 2013 — about double what you’d have if you’d invested in a group of companies that included heavy polluters. Cherny says that this is because financial value and moral values are more easily aligned than we think.
“Sustainable investing is investing at the intersection of value and values, and looking at companies whose environmental and employee practices are actually going to make them more profitable over time, because they’re investing in lower energy costs, a more productive workforce,” Cherny explains. “That’s going to yield benefit.”
When you lay it out like that, sustainable investing seems like very much a no-brainer. But that isn’t to say that there haven’t been valid criticisms over the years. The main one comes from this professor named Aneel Karnani, who in 2010 wrote a piece in the Wall Street Journal called “Against Corporate Social Responsibility.” This point of view is actually a lot more compassionate than it sounds: In short, pretending like companies can have their cake and eat it too opens the door to self-policing, when we want institutions like the government to step in and prevent companies from doing bad things.
Karnani has a good point, the best way to make companies stop polluting is not to point out they could potentially make more profits by doing so, it’s to pass laws that ban pollution and create consequences for the offenders. But this criticism also may miss the point of sustainable investing — which is that while we can only vote once per year, we can exercise our power as investors and consumers every second of every day.
Invest in Socially Responsible Funds
Investing your money in the funds like those offered Cherny’s Aspiration is a good place to start. Aspiration’s Redwood fund lets you invest as little as $100 in a big group of companies that’s fossil fuel free, guns free, while still being diversified.
It’s also increasingly likely that the company which manages your employer’s retirement options will have sustainable investment options too. The massive asset management giant Vanguard, which is famous for its low fees, has at least six funds that meet various socially responsible investing goals. Fidelity rolled out two sustainability funds just last year. Try to use these options when they’re available to you or, better yet, encourage your employer’s HR to select retirement plan providers with socially responsible options.
Be An Active Shareholder
Regardless of what you think about their goals, the animal rights organization PETA has proved incredibly effective at demonstrating how stock ownership can be a powerful tool for activism.
The idea is pretty simple: When you buy stock in a company, you become a partial owner. Usually a very, very small partial owner — but still a partial owner none-the-less, which entitles you to having a say in how the company is run. PETA usually does this by buying the minimum amount of stock in a company you need to be able to propose shareholder resolutions on which shareholders vote.
Even if the vote itself is a lost cause, you can exert pressure and yell at the company leadership in a highly public setting, which they obviously don’t like. Through the use of shareholder resolutions, PETA has helped achieve a number of changes at the company SeaWorld. Since purchasing shares right after they became publicly available in 2013, SeaWorld has, among other things, agreed to stop breeding killer whales in captivity and agreed to start winding down its controversial orca shows in certain cities. PETA also got Tesla to begin offering more non-leather customization alternatives using a similar tactic.
If you own at least $2,000 worth of a company’s stock and make a shareholder proposal, the SEC requires the company to put it on its next shareholder meeting’s agenda. $2,000 is a lot of money for an individual, but not for activist groups or people who pool their money together. With a big midterm election on the horizon next week, it’s something to keep in mind if the results don’t tilt your way.
This has been an adapted version of Strategy, a weekly rundown of the most pertinent financial, career, and lifestyle advice you’ll need to live your best life. I’m James Dennin, innovation editor at Inverse. If you’ve got money or career questions you’d like to see answered here, email me at email@example.com — and pass on Strategy with this link!