Sustainable Finance, A Guide: As a society, our consumption habits and behaviors have a massive impact on the environment. Though many don’t necessarily think of their finances when considering how to live more sustainably, the way we spend our money is linked to our eco-conscious practices or lack thereof. It’s not simply about what products we buy or limiting our consumption either, but includes green investing and being mindful of what businesses we support as well.
Making eco-conscious changes such as limiting our use of water and energy in our homes is still crucial, but we must also start bringing a sustainable mindset to our spending habits as well if we really want to make a difference. After all, money makes the world go round, but money can also make the world sick if we aren’t careful.
Using our money in more thoughtful ways is no longer a trend; it’s necessary. If we are going to build a more sustainable future for ourselves and generations to come, we have to start adopting better spending and investing habits now.
The Correlation Between Sustainability and Our Spending Habits
A recent study conducted by the Arizona Pathways to Life Success for University Students Project (APLUS) shows that there is “a striking similarity between sustainability and personal finance practices.” Those who already have a strong sustainability mindset tend to be more conscious of their consumption habits and how they impact the environment. In contrast, others that are less mindful of the environment don’t always consider how their spending habits impact global resources. However, to avoid irreversible negative impacts on the environment, all individuals must start to pay closer attention to their consumption habits and behaviors.
The study further showed that though individuals that practice sustainability are more conscious of their consumption habits, they have less financial knowledge and understanding of how to invest their money for the future. In contrast, those who do not practice sustainability feel more financially secure and have more positive saving behaviors such as saving for emergencies and investing to meet their long-term goals. From these results, the study ultimately concluded that pro-environmentalists want to have better financial habits, but they lack the knowledge and guidance they need.
What this means is that we need to have more resources and instruction available for those who are already sustainably inclined to help them advance their efforts and enable them to make even more of a positive impact. Financial educators and advisors, for example, can seek to guide young adults in their financial behaviors earlier, rather than waiting until they have entered the professional workforce and become our primary consumers. Younger generations show a desire to practice more sustainable financial habits, but they simply don’t understand how exactly to do so.
It is evident that there is a positive connection between sustainability practices and the desire to make more socially impactful investments, but many of us lack the information we need to get started. Guidance on green spending habits and socially responsible investing can help us develop more mindful financial practices to positively impact the environment.
Sustainable spending habits are easier to comprehend, and many have already implemented these practices into their daily lives. Often, it involves being mindful of waste, consumption, and energy use. Green spending habits can include:
- Buying local
- Shopping at thrift stores/upcycling and repurposing used clothes and other items
- Choosing ethical and environmentally responsible retailers
- Buying/consuming less meat and dairy
- Buying from farmer’s markets
- Using public transportation
Socially responsible investing or impact investing enables you to positively impact society and the environment while also earning a financial return. Generally, it involves investing in companies or organizations that have a focus on sustainability and ethical practices. However, the reason people are intimidated by investing is that it takes time and research. Simply throwing your money at any green company is not necessarily going to guarantee a return on your investment.
When looking for the right business or organization to invest in, you want to look for those with quality environmental goals, who are socially and culturally aware and responsible and are transparent about their ethical treatment of shareholders and employees.
To start impact investing, you should:
- Set goals: Think about the impact you want to make, what your values are, and develop an overall investment strategy.
- Research: Don’t simply rely on a company claiming to practice sustainability; dig deeper and look into their financial history, online reviews, check out their website, and search for sustainability reports.
- Seek guidance: Investing isn’t easy. If you feel lost or intimidated, seek out a financial advisor or someone you know who has investing experience.
- Go slow: Don’t put all of your money into it at once. Instead, develop an investment budget, decide where you want to put your money, and start by investing small amounts.
Younger generations entering adulthood and the professional workforce are more sustainably inclined than previous generations. They are aware of how their habits and financial behaviors impact the environment and are continually looking for ways to do better. And one of their biggest concerns is being mindful of what companies and products they spend their money on.
Today’s consumers have a strong desire to shop sustainably and interact only with ethical and eco-conscious companies. However, they should be mindful not to fall for every business or organization that simply claims to have developed sustainable practices. Not all companies are as honest and ethical as they seem.
For example, Exxon has garnered attention recently due to its claims of making efforts to help the world reach net-zero emissions by cutting drilling and reducing their shale output. However, the company is now being chastised by shareholders and investors that believe they aren’t doing enough even though they have the ability to do much more.
There are plenty of companies like this that say they are sustainable when in reality, they are putting in minimal effort. They have the ability to do more, but they simply don’t want to. When looking to invest and develop more sustainable financial habits, it’s important to look out for companies making false claims hoping to garner your attention and win your money.
Final Thoughts on Sustainable Finance
Developing better financial habits is a great way for today’s consumers to positively impact global resources while also earning a return on their investment. Of course, anyone can benefit from budgeting and planning more for their future. But pro-environmentalists especially, who are mindful of their financial practices and behaviors, can experience a greater reward as they are benefiting both the environment and developing healthier spending habits that can help them more successfully invest in their long-term goals.
About the Author
Amanda Winstead is a writer focusing on many topics including technology and digital marketing. Along with writing she enjoys traveling, reading, working out, and going to concerts. If you want to follow her writing journey, or even just say hi you can find her on Twitter.