Green Investing or Investing in Green – How to Invest in an Environmental IRA

For an increasing number of investors, “doing good” with their investments is as important as doing well. Tapping into this new environmentally conscious market, more not-for-profit organizations are teaming up with money managers to create a new line of impact investments. Here are some examples:
 Green Century Funds at [[|Green Century Funds]];
 Aquinas Funds at [[|Aquinas Funds]]; and
 Calvert at [[|Calvert]]
Caution: before you pick any, use a resource to evaluate and compare, such as Kiplinger’s Finance at [[|Kiplinger’s Finance on investing]].
While there is no “green IRA”, you can pick a mutual fund, such as the ones mentioned above, or select stocks yourself in within your IRA or Roth IRA – for more, see [[|Financial literacy millennials received poor marks but they can fix that]] That is, when you contribute cash to your IRA, it sits in a money market account, doing little until you invest it. If you want to invest in environmentally conscious companies, you can, as follows:

1. Select type of IRA: Before opening and IRA, decide whether a Roth IRA or a traditional IRA suits your needs (see the Financial Literacy post).
2. Open an IRA: Opening an IRA has never been easier. You can contact a financial institution, by phone or online, that offers IRAs, usually a bank, brokerage or mutual fund company. Do your research and be sure the broker offers a self-directed IRA, so you can pick your investment options. Also, be mindful of fees charged for trades, that is the buying and selling of stocks or funds. You want a discount broker. Finally, name beneficiaries in case something happens to you.
3. Choose your Investments: Your IRA can be made of stocks, mutual funds or a mixture. In choosing stocks, experts such as Jennifer Schonberger of The Motley Fool, suggest that you focus on particular countries as you make green stock or mutual fund selections for your IRA. She notes that China is an innovator in green technology, though it is also known as one of the world’s biggest polluters.
4. Fund your Account: Make a plan to fund your account and stick to it! Starting early and contributing regularly can have an enormous impact your account’s value due to tax-free compounding of returns (see “Save 10% of Income” at [[Financial literacy millennials received poor marks but they can fix that|Savec 10% of Income]] )

As with any stock market investing, your Green IRA may show you a roller coaster ride of value swings; however, if you have a long-term horizon, the significant growth potential should out-weigh this volatility risk. Also, if you pick a loser, you can always sell your investment (tax-free) and invest in another. Good luck!

P.S. – you can always decide to invest well, this is both easier and yields better returns, and then donate to environmental groups.

Going Green and your investments

There are interesting technologies being proposed and promoted.

Some of you may have even seen investments worth considering or at least want to consider “going green” with a portion of your portfolio.

Before you do so, consider the Harvard Business Review article reprinted below. The notion of “range anxiety” for dead batteries in electric cars is just one example of the need for infrastructure before all the technologies will have a chance to work.

Therefore, be very cautious about any green investing….. until we see more work done to support such technology ….


Throwing Money at the Energy Problem Isn’t Enough

12:18 PM Monday October 26, 2009
by Gardiner Morse

Tags:Green business, Technology

Today the U.S. Energy Department announced major funding for 37 cutting-edge energy research projects, from biofuel-producing bacteria to CO2-eating enzymes. The goal, as department secretary Steven Chu put it, is to “spur the next industrial revolution in clean energy technologies.” That’s an inspiring notion – but throwing money at clean-tech is a partial solution at best, no matter how revolutionary the research.

America has always had a love affair with technology, and president Obama is as smitten as Secretary Chu. Obama was in Boston on Friday just a few miles from our offices, touring an MIT clean energy lab and plugging the energy and climate bill now lodged in the Senate. He was clearly dazzled by the innovation he saw – “windows that generate electricity by directing light to solar cells; light-weight, high-power batteries that aren’t built, but are grown…; more efficient lighting systems that rely on nanotechnology” and so on.

But here’s the problem. No technology exists in a vacuum. Consider this: President Obama would like to see a million plug-in hybrids and electric vehicles on the nation’s highways in five years. But though automakers may have the technology and capacity to churn out that many electric cars, who’s going to buy them if there’s nowhere to plug them in? That was a hot topic at a plug-in vehicles conference held in Detroit last week, where “range anxiety” – fear of getting stranded with a dead battery – dominated conversations. Electric cars won’t seriously compete with gas cars until there’s a robust infrastructure of recharging stations as reliable and convenient as gas stations are now. Similarly, biofuel from bacteria won’t power much transport until the systems for large-scale production, refining, and distribution are in place. It’s a classic chicken-and-egg problem. But there is a solution.

Technologies can only flourish as part of a complex system involving interdependent business models, markets, and regulatory environments. In their Harvard Business Review article “How to Jump-Start the Clean-Tech Economy”, Innosight’s Mark Johnson and Josh Suskewicz argue that Edison didn’t just invent a light bulb. He created a coherent commercial system to support it. He designed a technical platform that included generators, meters, and transmission lines; he piloted the project in an ideal test market (lower Manhattan, teeming with enthusiastic early adopters); and he used his clout to get the regulatory support he needed, fighting off the lamplighters’ union, among other things. In short, he imagined the business ecosystem his light bulb would need and set about methodically creating it.

The billions of dollars being funneled into clean-technology development are necessary but not sufficient. Governments and businesses should be thinking as creatively about the infrastructure, business models, and regulatory regimes that clean technologies will need as they are about the cool technologies themselves. “What will it take to transition from a fossil-fuel economy to a clean-tech economy powered by renewable energy?” Johnson and Suskewicz ask. “The key,” they conclude, “is to shift the focus from developing individual technologies to creating whole new systems.”

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Let us know if you have questions or comments. Thanks,


Investing – socially responsible and going green

Going Green (this is a follow on to the SRI post earlier this year)

Going green – as we advise on socially conscious funds, investing “green” may not be the best solution; investing well and contributing charitably or politically to “green” causes may have a better impact on both your personal wealth and the environment

That being said, the attention surrounding Al Gore’s documentary, “An Inconvenient Truth,” and his new Nobel Prize, has resulted in a growing number of mutual funds and ETFs claiming to have green credentials. However, identifying the strongest investment options among this growing fund and ETF niche is a challenge as you may be surprised that not all green funds fit your needs.

There are some funds, and some stocks, that do well and others that do not. We are reviewing these to see what works well for investing.

A related comment comes from some mortgage work we do, as seen on the Marblehead Savings Bank webpage:

If all U.S. households received and paid their bills electronically, the country would:

Save 16.5 million trees each year, or the amount of lumber needed for 216,054 typical single family homes;

Reduce toxic air pollution by 3.9 billion tons of carbon dioxide equivalents, akin to taking 355,015 cars off the road; and

Reduce by 1.6 billion pounds the solid waste generated in a year, equal to 56,000 fully loaded garbage trucks.

At our firm, we are doing what we can: filing tax returns electronically and saving files as PDFs rather than printing them.

Let us know if you have questions or comments. Thanks,


Socially Responsible Investing and Going Green

More people ask about Socially Responsible Investing (“SRI”) and about “going green” these days.

My usual response is that you give up performance with SRI and suffer with higher fees and a limited universe of investments. It is therefore better to have a good investment plan and use money from that to support the causes important to you.

I have an article that I can send to you that gives both sides and some statistics. I have also read more in depth articles on SRI and specific funds.

The key observation is how broad or narrow the definitions of being socially responsible get in order to still have reasonable performance. Some funds even stray to get performance ……

On going green specifically, we have seen environmentally oriented mutual funds pop up since the oil scare of the 1970s. The conviction that alternative forms of energy will be necessary to meet global demand in coming decades has lead to responses by regulatory, corporate, consulting and other groups. Investors see that thinking green will be more than a passing fad.

As with SRI in general, the term “going green” has different meanings to different people and, unfortunately, to different managers and mutual funds. You need to be careful (1) that the fund invests in a way that you consider “green” and (2) that, in so doing, it has the potential to do well over time (i.e., its environmental goals do not frustrate its investment goals). The funds may be large cap, for global impact, or smaller cap, for more localized impact. The managers may not have experience with the new technologies. Furthermore, regulations are changing, which could have an impact on the companies in which the funds invest. Furthermore, large or small cap, the fund may not be well diversified because there are few companies that meet their investment criteria. So, you need to be careful in your selection.

As we said before, you may be better off to recycle, purchase conscientiously, invest well, and contribute to causes that will have a global impact rather than hoping for “making green from going green”.

If you want to discuss this, let me know please.