In numerous impactful ways, the different programs and investments aimed at conservation make the world prosperous and truly unique. Conservation programs and other efforts keep our water clean and our air breathable while also protecting our wildlands and wildlife. In addition to their benefits to nature, these efforts boost national economies and improve global infrastructures in various ways. They boost global competitiveness and encourage economic investments in local communities. In this article, we’ll discuss the details and importance of natural resource conservation, what ESG investments involve, and how your money can help protect natural resources today.
Natural Resource Conservation
Keeping our water clean and our air breathable is an effort everyone can get behind. While protecting wildlands and wildlife, natural resources and their protection can positively affect many aspects of our world. Natural resource conservation specifically involves efforts to preserve, protect, manage, and restore natural environments and ecological communities that dwell in and around them. Conservation generally includes the management of natural resource used by humans. Humans most frequently use the planet’s natural resources for sustainable economic and social utilization as well as other public benefits. However, it’s vital to protect and maintain natural resources so they last as long as possible for the world to enjoy.
Natural resource conservation keeps the planet’s various natural resources sustainable, so these resources can continue to exist for as long as they are able, providing beauty and endless benefits to natural and industrial environments. Careful and considerate maintenance of a given natural resource effectively prevents its disappearance. Natural resources are the physical supplies from things existing in nature, including water, animals, soil, air, and energy resources. Established conservation organizations and people worldwide continue to grow increasingly aware of the importance of natural resource conservation and interested to learn how to help.
ESG Investments
Interest and involvement in environmental, social, and governance investments have grown right alongside the growing participation in natural resource conservation efforts. Various investors continue to apply non-financial, ESG factors to their analysis processes to determine growth opportunities and material risks. Though environmental, social, and governance metrics aren’t a common aspect of mandatory financial reporting, businesses continue to make more related disclosures in stand-alone sustainability reports as well as their annual reports. However, there is no definitive classification for ESG factors, as they’re often interlinked. It can be fairly difficult to classify an environmental, social, or governance factor and give it a monetary value.
ESG factors, such as what the current employee turnover is for a particular business, can be hard to assign a value to, with the value being the cost of staff turnover. However, numerous institutions, including the Task Force on Climate-Related Financial Disclosures (TCFD) and the Global Reporting Initiative (GRI) are working to define form standards and materiality to better enable the inclusion of ESG factors in processes of investment. Environmental factors generally involve the conservation of the natural world. Social factors involve the consideration of relationships and people. Governance factors involve standards for running a business.
Responsible Investing to Protect Natural Resources
When you seek to responsibly invest with ESG investments and other investments that protect natural resources, there are different areas you can focus on. Environmental investment areas include air and water pollution, climate change and carbon emissions, biodiversity, energy efficiency, deforestation, water scarcity, and waste management. Social investment areas include human rights, customer satisfaction, labor standards, diversity and gender, staff engagement, data privacy and protection, and community relationships. Governance investment areas include audit committee structures, board composition, bribery and corruption, lobbying, executive compensation, whistleblower schemes, and political contributions.
For its diversity and range of focuses, many also refer to ESG investing as socially responsible investing, impact investing, or sustainable investing. In addition to typical investing options such as bonds, stocks, and real estate, you can invest in natural resources. By investing in natural resources, you can help the planet in addition to benefitting financially. Once you’ve learned what natural resources there are, what conservation involves, and what focus areas you can consider for your investments, you can begin to invest in natural resources responsibly. Your top options are acquiring natural resources directly, investing in companies that handle the purchase and sale of natural resources, or investing in companies that produce natural resources.
Acquiring Natural Resources Directly
One option for natural resource investing is to work at acquiring natural resources directly. Buying these resources directly can work reasonably well for smaller investments, such as precious metals. However, this investment option can quickly become complicated with resources such as natural gas, timber, and other natural resources requiring large storage facilities. Large storage facilities can come with various associated costs that can affect the feasibility and financial benefits.
Investing in Companies Handling Natural Resources
Once you’ve narrowed down which responsible investing options you want to seek to protect and support natural resources and if you’ve selected company investments, you can continue to look at and narrow down the specific company and organization options. When investing in companies that handle natural resources, you’re largely looking at futures and options. Futures are contracts that obligate the seller and buyer to buy stocks at fixed times and prices. Options allow the seller or buyer to sell/buy an asset at a determined time and rate but don’t force them. Popular futures and options choices are Eurex, CME Group, and London Metal Exchange (LME).
Investing in Companies Producing Natural Resources
If you want to support and protect resources by investing in companies that produce natural resources, you can consider exchange-traded funds (EFTs) or stocks. Natural resource EFTs invest in businesses that engage in the distribution, production, and storage of natural resources. Natural resource stocks are stocks in companies that engage in these same behaviors for natural resources.
Using Your Money to Protect Natural Resources
Natural resources are essential to protect and maintain so they can live on sustainably. For more guidance on how your money can help protect natural resources, connect with EGÉA SRI.
Disclosure:
A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.
Socially Responsible Investing (SRI) / Environmental Social Governance (ESG) investing has certain risks based on the fact that the criteria excludes securities of certain issuers for non-financial reasons and, therefore, investors may forgo some market opportunities and the universe of investments available will be smaller.
This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.
