{"id":3085,"date":"2008-06-10T10:00:18","date_gmt":"2008-06-10T16:00:18","guid":{"rendered":"http:\/\/wordpress-367309-1145705.cloudwaysapps.com\/?p=3085"},"modified":"2008-06-10T10:00:18","modified_gmt":"2008-06-10T16:00:18","slug":"roi-of-green-investing-part-2","status":"publish","type":"post","link":"https:\/\/sustainablog.org\/articles\/roi-of-green-investing-part-2\/","title":{"rendered":"ROI of Green Investing, Part 2"},"content":{"rendered":"
In my last post, I talked about the ecological and social outcomes one might wish to support via green investing. But what about the financial return on investment (ROI)?<\/strong><\/p>\n Financial ROI (profit) is vital to green investing. This can sound jarring to green-minded folks because for quite a long time, the profits of most businesses have come at the expense of human and ecological health. Yet the underlying system holds much promise. I’m seeing a new generation of green businesses that align profits and green objectives to create powerful engines for economic transformation. These businesses are building the reality envisioned by a previous generation of green non-profit leaders.<\/p>\n Financial ROI is important because <\/strong>it impacts the rate and scale at which this new reality can unfold.<\/strong><\/p>\n Let’s say two companies are offering comparable solutions to protecting native forest habitat. The company with the higher ROI will most likely have the financial capacity to scale-up their solution, resulting in more forests being protected per investment dollar.<\/p>\n ABC’s: What is Financial ROI?<\/strong><\/p>\n Financial ROI describes the comparative monetary return of different investments. For example, a bank certificate of deposit paying 4% annual interest will return $4.00 of profit for each $100.00 invested.<\/p>\n In the stock market, the term “price to earnings ratio”, or “P\/E” for short, provides a shorthand description of this relationship between the amount invested and the ROI. In the bank CD example, you would have to pay $100.00 (the price) to get $4.00 of earnings (a.k.a. “profits”), or a P\/E of 25. All traded stocks are rated by a “trailing P\/E” — the current price divided by the previous 12 months’ earnings.<\/p>\n To a green investor, the combination of green values, social values, and the financial ROI, come together to make the complete case for making a particular investment.<\/p>\n