Green Investing is a term widely used that pertains to socially responsible investing or SRI. This type of investment focuses on companies or projects with a commitment to help conserve the Earth – production and discovery of alternative energy sources, implementation of clean air and water projects and other endeavors that may fit under this umbrella.
Pure-play green investments are those that get most, if not all, of their revenues and profits from green-based activities or product lines.
When you refer to something as green, sometimes it can be a little vague. However, when people refer to green investments, it automatically points to investing in activities that are thought to be beneficial for the environment whether directly or indirectly.
Because this practice is such a broad term, you will find that a portion of the investors invest only in pure-play options such as companies that make renewable fuels or manufacture energy-efficient technologies. Some investors put money in companies that have good business practices such as choosing not to print on paper or recycle waste in order to achieve sustainability.
It can be quite tricky in this arena though. For some, purchasing stock in a business that applies environmentally conscious business practices in a classically “ungreen” industry may not be considered a green investment. One good example is investing in an oil company. While the company may practice conserving resources and going green, but the fact that they are literally burning fossil fuels and contributing to the global warming may be such a huge contradiction.
Investing in “green” companies can be high-risk than other equity strategies you find because most of the companies in this category are juvenile with low revenues and high earnings valuations. But, if motivating eco-friendly businesses is important to investors, green investing can be a great way to put money to work.