CEO of investment management company VegTech
Invest Elysabeth Alfano shares her tips on how to invest for the climate.
As the CEO of investment management company VegTech Invest, Elysabeth Alfano knows a thing or three about impact investment. Alfano is also an advisor to EATV, an ETF that invests in companies that positively impact climate change, planetary health and sustainability, human health, and animal health by innovating with plants and plant-derived ingredients to produce food products that are animal-free. Below, she shares her top tips on how to get your investment portfolio into the best climate shape so that you can put your money where your convictions are.
1) Decide & conquer
Step one for getting your portfolio in climate shape is deciding how much of your investment portfolio you like to put towards a healthier planet. 10%? 20%? 100%? There is no right answer, and no one has to know but you. As Shakespeare famously wrote, ‘to thine own self be true’: deciding to invest in what you believe is important is the first step toward creating change.
Step two in the first phase of climate investing is researching the sectors that you believe will have the most impact and positive disruption for the planet. Advancements in Climate Tech in sectors such as Plant-based Innovation (Linked to previous EATV launch article?) and Alt Proteins, Building and Product Materials, Energy, Transportation, and even Water are all sectors that have advancements to produce products that are either limiting the damage of existing processes or directly replacing damaging products and processes for a healthier earth.
Once you decide on the sector or sectors that want to invest in to help make a difference in the future, get ready to go deeper into your research.
2) Dive into the land of ETFs
What’s an ETF you say? An ETF is like a grocery cart. When you go shopping, you put all of your plant-based items in one cart. It is the same thing for a thematic ETF: one ticker is a basket of companies all around the theme you want. This way, you invest once for ease, but get the diversification benefit of typically 40-140 individual companies without having to individually invest in each. These companies are already represented in the basket.
This diversification benefit is a biggie because it avoids taking on the risk of investing in one company. The risk is spread out over many, which can mitigate the highs and lows.
Remember that each ETF will have its own fee, but the benefit of not having to research each company and rebalance the investment weight of each company in the ETF basket is usually worth the fee to most who aren’t day traders. As an example, if an ETF has an expense ratio of .75%, an investment of $1000 would be a fee of $7.5. (.0075x$1000.) In other words, it is a minimal fee to let someone else do the company research and rebalancing.
Now that we have established what an ETF is, find the ETFs that fit the themes that you believe will have the most impact. Then do a deeper dive into these thematic ETFs. Most will have newsletters and should sign up for those to follow their progress.
Do they have the companies that you want to see? Are they a pure-play, investing 100% in what you want? Have they been around for at least a year? Get to know that ETF and even call or message the ETF Fund Manager if you would like. People rarely call them, so they will be excited to nerd out over the numbers.
3) Beware of greenwashing
Related to #2, go beyond the title of the ETF. Beware of funds that say they are focused on climate or food and then you find that they are focused on big tech. Be willing to spend some time on the ETF’s Top 10 holding companies to get a better understanding of exactly what companies are in this basket of thematic stocks. Every ETF website page will disclose the Top 10 holdings, usually on the homepage. So, it is easy to find and do a bit of vetting.
4) Beware of greenwashing, not kidding
Greenwashing was all the rage over the past few years, and it has caused quite a backlash. Another way to check to see if the ETF truly has a positive impact on the planet is to check to see if it has a Climate Neutral certification and can show its authentic status.
Carbon credits were so 2022, so ideally look for ETFs that are carbon neutral without buying credits. Carbon credits mean that the ETF is still creating a negative impact but is offsetting it with credits. Ideally, the Climate Tech in the ETF or ETFs you choose would make the ETFs carbon neutral, avoiding making the emissions in the first place. This would render the ETF Carbon Neutral without buying credits.
5) Let It Be Known
Reach out to your global wealth manager, if you have one, and tell them that you want your portfolio in climate shape. Since this is important to you, don’t take ‘no’ for an answer. Remember, you are Climate Change Empowered and you’ve done your research. You know what you want!
Even the simple fact of communicating your priorities to your advisor is a powerful step in speaking up for the planet. Your Financial Advisor wants to help you invest for your goals, so they will be more than willing to hear you out.
If you would prefer to create a community around investing and bounce your thoughts off many people, consider an investing club or group which can usually be found on Facebook or Meetup.com.
The business bottom line is that a business that is bad for the planet has no business being on the planet, so don’t support the companies you don’t believe in. Take the time to research what is important to you and invest alongside your values. It’s meaningful and powerful to stand up for what you believe in. There’s no time to waste. It’s 2023 and time to get your portfolio in climate shape!
About The Author: Elysabeth Alfano is the CEO of VegTech Invest, Advisor to the Plant-based Innovation & Climate ETF, EATV. She is also a consultant and host of The Plantbased Business Hour: a Podcast for Investing in Sustainable Food Systems. Elysabeth speaks around the globe, including recently at COP27, on the intersection of investing, sustainability, and the global food systems transformation.
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