Money may not grow on trees, but eco-friendly stocks could have investors seeing green in more ways than one.
While many people celebrated Earth Day by identifying ways to improve their own carbon footprint to protect and conserve the most valuable asset we have, the recent observance also presents an opportune time for investors to review their portfolio and invest in sustainable companies.
According to a 2012 Harvard Sustainability Review report, high sustainability companies outperform low sustainability companies in the stock market, as well as from a profitability perspective, making them especially appealing for investors looking to reap benefits over time.
[See: 7 Socially Responsible ETFs for Investors of All Stripes.]
There are a few things to keep in mind when evaluating a company’s sustainability, including how the company seeks to promote energy efficiency, prevent air and water pollution, reduce carbon emissions and deforestation, conserve water and encourage proper waste management, both now and in the future. In fact, avoiding these issues could present future risk to one’s portfolio. For example, recent multimillion dollar lawsuits illustrate the increasing financial risk of hazardous releases for chemical firms.
Apple (ticker: AAPL) and Alphabet ( GOOG, GOOGL) are two green-thinking companies investors might want to consider to yield both environmental and financial benefits this year.
Apple. According to Apple’s 2017 Environmental Responsibility Report, 96 percent of the company’s energy use in 2016 came from renewable energy.
Its new campus, Apple Park, will be the largest LEED Platinum-certified building in North America, and it intends to plant 9,000 drought-tolerant trees. Seven major suppliers of Apple pledged to power their Apple production with renewable energy in 2017.
Additionally, 99 percent of the paper Apple uses is from recycled or responsibly managed resources. One of its longer-term goals is to reduce mining of raw materials and rely increasingly on recycled material, especially from older Apple products.
Finally, the company is looking to reduce its reliance on toxic substances, which can harm the environment and humans alike.
[See: These 7 Funds Make You Feel Good About Investing.]
Over the last five years, Apple’s stock has returned 25 percent per year, versus 13.7 percent for the Standard & Poor’s 500 index.
Alphabet. In 2016, the company set a goal of becoming 100 percent reliant on renewable energy by 2017. According to its research, global raw material usage during the 20th century increased at twice the rate of population growth, which may be accelerating climate change.
Research from the Lawrence Berkeley National Laboratory indicated a shift to cloud-based email and documents and away from locally hosted servers would reduce IT energy use by 85 percent. At the heart of its data centers are Google-designed microprocessors (Tensor Processing Units) that are 30 to 80 times more energy efficient than standard microprocessors, which is helping boost Google’s margins relative to its competitors.
The long-term goal of Alphabet is a zero-carbon world where everyone on Earth has access to clean, carbon-free energy 24 hours a day, 365 days a year. The key to achieving this goal is the Earth Outreach Program, which is now combining machine learning and cloud computing to build a living, breathing dashboard of the planet.
Google Maps also helps provide billions of consumers with environmentally friendly transit results, offering options ranging from mass transit to bike routes and traffic information. Global Fishing Watch, powered by Google Cloud Platform’s machine learning algorithms, monitors the planet’s fisheries and 70,000 of its largest commercial fishing vessels.
Further, the company’s Nest Learning Thermostat uses learning algorithms and smart control to reduce customers’ energy needs by 10 to 12 percent for heating and about 15 percent for cooling.
Alphabet has delivered a 20.6 percent annual return, versus the S&P 500 return of 13.7 percent.
Investing in environmentally conscious companies like Apple and Alphabet can reward shareholders over time. Through acting in the Earth’s best interest, companies cultivate a positive consumer image, reduce the risk of environmental negligence, and may even trim their bottom lines as sustainable energy becomes more budget friendly.
Therefore, in addition to challenging themselves to be a little greener this year, investors may want to consider challenging their portfolios as well.
[See: 6 Reasons to Love Apple Stock in 2018.]
Disclosure: Leslie Thompson and clients of Spectrum Management Group own Apple and Alphabet stock.
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How Investing Can Be Good for the Earth originally appeared on usnews.com
