How to invest in the planet

More than ever, people are interested in using their investment money in ways that help the planet, directing funds toward green stocks and other areas.

The trend goes by many names, including green investing, ethical investing, socially responsible investing, and ESG investing (for environmental, social, and governance). When you do your research, check into a fund or advisor’s methodology of choosing investments to make sure it aligns with your goals.

Also, consider that green investing has been on an upswing, which could be a cause for caution as well as enthusiasm. Kiplinger says that from the start of 2020 through late January 2021, “a basket of U.S. renewable-energy stocks has out-gained the broad S&P 500 index by more than 200 percentage points.”

It added that the median price-earnings ratio of the renewable names, based on projected profits, was 40 percent higher than the S&P 500’s.

In other words, green investing is at a high and could encounter a bit of a shake-up, though its long-term prospects still look favorable. A number of exchange-traded funds include portfolios of companies with an environmental focus.

So how to get started? A couple of NerdWallet suggestions include investing in ESG funds and investing in sustainable stocks. ESG funds are mutual funds graded using ESG principles, investing in companies that have a sustainable and societal impact.

You can also request an impact report that details the effect your investment has had on the real world.