How To Get Your Portfolio Into Climate Shape

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 into climate shape is deciding how much of your investment portfolio you would like to put towards a healthier planet. 10%? 20%? 100%? There is no right answer, and no one has to know but you. Deciding to invest in what you believe is important is the first step toward creating change. 

Step two for those at the beginning of their climate investing journey involves researching the sectors that you believe will have the most impact and positive disruption for the planet. You can consider sectors such as EVs, green building, alternative proteins, food waste and clean energy for example. What’s important is to look for technologies that are both fighting the consequences of the current climate crisis and helping future-proof our daily life against climate emissions increases.

2) Dive into the land of ETFs

What’s an ETF you say? An ETF (or electronically traded fund) is like a themed grocery cart. When you go shopping, you put all of your plant-based items in one cart. The same goes for a thematic ETF: you invest in a basket of ‘themed’ companies, and you get to choose the theme. ETFs tend to have between 40 to 140 individual companies. They allow you to invest in many companies without having to individually invest in each. ETFs allow you to diversify your risk and help you avoid taking on the risk of investing in one company. As the proverbial saying goes: you don’t have to put all your (plant-based) eggs in one basket. The risk is spread out over many companies, which helps to mitigate the highs and lows of your portfolio performance. 

Now that you are up to speed on ETFs, you can find an ETF that fits your theme, aka the one you believe will have the most impact. Once you have found the one you like, it’s important to do a deeper dive. Most ETFs have extensive resources on their websites and many have newsletters you can subscribe to.

Here are some questions you may want to consider: Does the ETF have the type of companies that you want to see? Does the ETF include the key companies in the sector you are looking at? Are they a pure play, aka investing 100% in the theme you want? Have they been around for at least a year? 

NB: ETFs have fees, so if you invest in an ETF you will need to commit to those fees. The fees tend to be quoted as expense ratios. As an example, if an ETF has an expense ratio of .75%, an investment of $1,000 would be a fee of $7.5. (.0075x$1000.). The fees are a fraction of the hassle involved in doing detailed company due diligence and rebalancing the investment weight of each company in the ETF basket. Paying the fee is usually worth it for those of us who aren’t active day traders. 

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, only for you to find that they are focused on big tech. Be willing to spend some time on an 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 its Top 10 holdings, usually on the homepage so it’s easy to find and do a bit of vetting.

4) Beware of greenwashing, not kidding

Ideally, you want to look for ETFs that are carbon-neutral without having to buy credits. Companies that make use of carbon credits are basically still creating a negative impact while offsetting that impact with credits. Ideally, you want to choose an ETF with Climate Tech companies that are avoiding creating greenhouse gas emissions in the first place. This would help render the ETF carbon-neutral without buying credits.

Greenwashing has popped up all over the place in the past few years, and it’s getting harder to discern who is truly doing good from those that are simply paying lip service to the climate impact movement. 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.

5) Let It Be Known

Reach out to your global wealth manager, if you have one, and tell them that you want to get 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 advisor is committed to helping you invest for your goals, so they will be more than willing to hear you out.

If you would prefer to be a part of an investing community, consider joining an investing club or group- Facebook and Meetup.com have many you can choose from.

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 powerful to stand up for what you believe in, especially financially. Given the extent of the climate crisis, there’s no time to waste. Make 2023 the year you get your portfolio into 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.