How to Buy Green Bonds (Step-by-Step Guide) (2024)

The Luxembourg Stock Exchange listed its first sustainable stock in the year 2017. Green bonds (or eco-friendly funds) have become one of the most popular and profitable investments of the new age – especially for people who want to guarantee their next investment can make a difference to the planet’s health.

An investment in green bonds is recommended more often by fund managers and wealth specialists today than ever. Green bonds are sustainable and give back to the environment and not just on your money.

There are hundreds (upon hundreds) of green bond options out there: Amazon listed their first one in 2021, and some investors have already made more than their investment back while doing their part for a healthier world.

For a long time, green or sustainable bonds were only within the reach of financial advisers and large corporations with investment power. This is no longer true now that green stocks and bonds are more popular everywhere.

If you’re looking for information on investing in a green bond, the procedure has been made considerably easier than with stock-based investments of ten or twenty years ago. Stocks and bonds can be purchased with a single click rather than five or six phone calls.

Apps like Betterment and Robinhood put the control back in the hands of the individual investor: that’s you.

We’ve put together this great step-by-step guide that can help you find the best green stocks to invest in and tell you which apps are the best for immediate investment. You’ll find anything you want to know about investment in green stocks or sustainable funds in this article.

First, let’s talk about an introduction to green bond investing if you’re still new to this powerful, exciting type of wealth distribution.

An Introduction to Green Bonds

When an interested buyer approaches the stock and bond market for the first time, expect to see an overwhelming list of different options in front of you.

Stock market investments offer tech companies, healthcare companies, startups, and very popular corporations like Netflix, Amazon, and more. Not to mention the many different financial advisors out there.

Where do you even start?

Green bonds are a good place to begin. Suppose you filter your possible investments by eco-friendliness or environmental sustainability. In that case, it cuts out about 80% of companies whose profits do not care about the environment or its impact as much as green investment funds.

If you are overwhelmed by what the stock market has to offer, why not narrow it down to green bonds?

Here’s what you should know about what green bonds are and how they work.

What are green bonds? How do green bonds work?

A green bond is a loan to finance sustainable and environmental projects such as renewable energy and energy efficiency projects.

Companies will issue green bonds to fund projects since infrastructure and renewable energy are extremely capital-intensive. This makes the market opportunity for the global green bond market tremendous.

If you are looking to buy green bonds, they come in various forms, such as mutual funds, green bond ETF options, and investment-grade bonds.

Questions like the company’s carbon footprint – and its investment in sustainable causes – are all important when deciding what is a green bond versus not.

Green bonds are sustainable and eco-friendly and do not invest their money in industries like natural gas, oil, fracking, weapons, or industries that can harm the “green” nature of the fund. Sustainable bonds are much less likely to be involved in darker industries and corporate scandals, and they are worth every bit.

Green bonds are preferred thanks to the emphasis on caring for the environment with every cent that flows through the fund. Any investors who want to guarantee their investment is safe, sound, and sustainable should consider green bond principles first.

See Related: 11 Best Fossil Fuel Free Funds for ESG Investing

What is the opposite of green bonds?

Sin stocks and their corresponding lenders are the direct opposite of green bonds, and in modern times this describes the kind of basket that most managers wouldn’t recommend you to keep your eggs in.

Where eco-stocks are sustainable, sin stocks capitalize on sheer capital for capital’s sake. Sin stocks can be mixed with industries like tobacco, alcohol, and sometimes even weapon manufacturing or distribution at extremes.

We know that sin stocks hurt the environment – and often, on the eventual consumers.

Green investing, in general, is a means to move away from sin stocks and fossil fuels for a better future. There’s all of the investment value, but none of the risk.

What are some of the advantages of green bonds?

The green bond market has a few advantages over traditional individual bonds. First, all green bonds are certified as environmentally sustainable. If you invest in a green bond, you know you are doing the right thing for your money, the environment, and future generations who will continue the legacy you might be building now.

Second, these bonds are progressively easier to access. Today, anyone can invest in a green fund with the right app, though this was not the case a couple of decades ago when investment still meant many meetings with a tight-lipped manager.

Third, green bonds are known to have an exceptional return – if you choose the right one at the best time. One more aspect makes the green bond a better choice: eco-friendly investments are less risky.

Corporate scandals and sin tax are an added risk to non-eco investments that have the potential to sink them.

How are green bonds verified?

Green bond issuers must have their bond offering be verified and certified by an independent authority. Green funds must be checked against several criteria, including their investments and carbon footprint, before earning this certification.

Usually, different countries have different certification boards for green investments. Check the country your fund is based in before making your final choice – and it’s recommended to double-check before assuming all information is correct!

Verified green bond funds make their way to the bond market, where investors like you can grab their part. Unverified funds that claim to be green (though aren’t) exist out there, and double-checking is recommended because of this.

If you want your investment to go well from here, make sure that you invest only in verified, certified green funds that can prove their claim.

Why doesn’t everyone invest in green bonds?

The real truth about this is that not everyone knows they can! Investment means different things to different people. Grandparents and parents do not invest the same as the next generation will – and today, younger generations are moving to green and climate bonds at a steady rate.

A few decades ago, it wasn’t as easy to open an app, enter a few details, and proceed straight to buying your first green bond fund. It took meetings, phone calls, and tons of paperwork on the back end.

This is not the case today, and green bond investment is easier. The more word gets around about green bond investing, the more likely it is that more people will get into it. That’s all the more reason to seize the opportunity to find the right green funds for you today.

What are some of the disadvantages of green bonds?

Green bonds provide many benefits, which is one of the reasons why many individuals want to go straight into green and sustainable investing as soon as possible for all the advantages they may provide.

The bonds, on the other hand, might have some disadvantages. These are crucial to consider.

Some disadvantages associated with green debt include that they are harder to sell quickly than traditional bonds. Because they are smaller funds, it requires more administration on the businesses’ side when stocks change hands.

Sometimes, issued green bonds can be a bit more costly to invest in than sin stocks – but is this much of a disadvantage compared to your potential risk-adjusted return?

The potential returns and advantages of green bonds far outweigh the risks. Consider a green bond fund if you want an investment that gives back.

How can I invest in green bonds?

That is what the rest of this article is about. We put this article together when we noticed that although there is a lot of data about renewable energy, energy efficiency, and green projects, there are very few step-by-step guides.

We believe that everyone should be given access to investment knowledge. Successful investment doesn’t require a degree in economics but a combination of good timing and the right knowledge.

Here’s our great step-by-step guide that’ll take you through everything you need to know about buying green bonds, from the first cent you intend to spend to the last profitable penny you’ll get to cash out.

See Related: Best ESG Stock Screeners

How to Buy Green Bonds: Step-by-Step Guide

Investing in green bond issuance has become a lot easier over time. If you want to invest, there’s no need to fork over half your money to an investment company or fund manager first – but channels and platforms exist where you control what your money does and where it goes next.

Want to find a global green bond fund or new fixed-income investment? It’s not as difficult as it used to be, and it’s not nearly as hard as most online guides make it sound.

Green funds are listed on the stock market just like any other type of fund or stock: finding the perfect one that takes some skill.

Here’s our step-by-step guide that’ll tell you exactly how to find the best investment apps, the best green and climate bonds, and how to make your first green bond investment.

1: Get To Know Bonds

The first step for any interested investor is to begin their journey into green bond research. We’d guess that’s what brought you to this page in the first place!

Bonds, in general, aren’t for everyone, but if you think they could make up some of your investment portfolios, welcome to one of the best investments that you can make in the modern age.

Before you proceed with the rest of this article (or invest any money towards a bond), getting to know bonds is a good idea. Do some more reading and do some more research.

Get to know bonds: knowledge is power, especially when you intend to spend any of your money!

See Related: Best Stock Screeners to Use

2: Download An App

Investment doesn’t happen through phone calls, appointments, and weird, stuffy investment offices. Stock and bond trading has become a lot more high-tech, and it’s a lot more accessible for everyone. If you want to invest, you can!

The first step to green bond fund investment is downloading an app to access the stock and bond markets. Investing from an app hasn’t been around for very long, but it’s quickly becoming the easiest way to get your trading hat on.

Betterment, M1 Finance, and Robinhood are three of the most popular apps for investment at the moment.

Create an account, add your budget to the system, and choose your investments.

Apps like Robinhood will sometimes make their own recommendations when it sees stocks or fixed income investments that are hot right now, or about to go up in value.

Each fund-trading app might have different terms. Read the individual terms and conditions of each app before you trade, even though all three of these apps are similar in their user interface and process.

See Related: Best Banks for Low-Income Earners

3: Create Your Account

Once you have downloaded your chosen fund investment app, the next step you’ll have to follow is to make an account through the app. Account creation seems simple, but it’s one of the most common places where mistakes can happen!

An account will require basic information, like your name and identity details. Most apps will also ask for your payment information so that transactions through the app can be done in seconds.

That’s pretty much all you’ll need to do for the suggested three fund-trading apps. But having said this, make sure that all the information is correct.

After creating your account, go into app settings to refine how your app trades and works.

This is important, as things like trading thresholds and other settings will be hidden here – and there’s a good reason not to leave settings like this on automatic when trading.

Not sure how to use your investment app to find green bond funds or exchange-traded funds?

Read the instructions first!

See Related: Best Climate Change Mutual Funds

4: Secure Your Budget

If there’s one thing any investor will need first, it’s a clear projection of their intended budget to trade with.

Decide how much money you will put aside for your investment, and draw this up – officially and on paper, just like any other type of budget. This step is recommended to ensure you know what you are working with.

It’s a common first-time trader’s mistake to go beyond their means or to make an exciting trade on a whim – only to realize they went far beyond what they should have gone with.

Don’t do this; you’ll already be a more advanced trader than 99% of the other competitors on the floor. A first-time eco-investment budget doesn’t have to be astronomically large. Choose an amount you are comfortable forking out: not less, not more, but the amount you can afford to set aside to make more.

Once you have set your budget, it’s time to proceed to the next step.

5: Study The Climate

Stock and bond trading apps like Robinhood are beneficial because they give you an immediate insider’s look into the market – and all of it trades at real-time speeds. Use the resources that your chosen trading app makes available to you.

If you want to be a successful investor, study the climate first. Look at the progression of the top eco-funds over the past few days. Look at what you like and what you don’t.

Practicing and keeping your eyes open is the best way to develop a feel for trading.

6: Choose Your Bond

If you have set your budget and studied the climate of investment a little more, it’s time to refine your search. Now, most trading apps like M1 Finance allow you to search green investments by criteria – and one of the things you can select, at least on most, is eco or green investment funds.

A refined search gives you a clear view of what’s out there and what it’s going for right now.

Have you found something you’re interested in? There’s one more step.

7: Request More Details

An investment should never be a blind leap of faith but instead a clever and calculated jump. If you see a fund that you like, don’t just click straight to the trade – that could be one of the biggest mistakes, and you might see a better opportunity five minutes after you have made the last.

Request more details about your green fund first, no matter if it’s a green bond fund like a green bond ETF or one of the top mutual funds on the market.

Details are available by clicking on each fund. Here, it’s recommended to analyze the fund for its merits and performance. Again, see what you like, see what you don’t, and make your choice from there – no leaps of faith!

If you are happy with what you see and you think this could make a good green bond investment, proceed to the very last step: make your investment.

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