Want to help the environment? Don't bother with socially responsible funds - do this instead

Several years ago, developers in Tofino, Canada planned to cut down a massive tree they deemed unsafe.

If it fell, it would have crushed a hotel on the bank beneath it.

Protesters climbed the thick trunk to a dizzying height. They built a platform in that tree and they remained there for ages.

I watched from beneath, wondering how long these guys could hold out. 

Supporters rigged up pulley systems, allowing the tree dwellers to eat and remove human waste (although they probably enjoyed peeing from the branches in the middle of the night).

After several weeks, the tree guys got their wish. That tree still stands with steel belts around its trunk, supported by cables.

This was a dramatic effort to save one tree, yet we’re all increasingly aware of what we’re doing to our environment. We’re metaphorically peeing in our own drinking water. 

But along with fears of deforestation and global warming comes a solid opportunity to make our lives much better. I’m talking about the trifecta of success: money, more happiness and an empowered sense of purpose. It just takes the right investment.

No, I’m not launching into a spiel about socially responsible or “green” investment funds.

I don’t have a problem with them. And I call myself an environmentalist.

But investing in socially responsible funds has almost no impact on the environment. They have even less impact on your wealth, compared to a traditional portfolio of index funds. The long-term performance would roughly be the same.

When we own shares of a public company (whether that’s an individual stock or indirectly in an index fund) our money doesn’t go towards supporting that business. Exxon Mobil won’t use your money to drill for oil. A solar energy company that trades on a stock exchange won’t use your money to seek power from the sun.

Beyond the private, venture capital stage, money we use to buy shares doesn’t directly support the businesses we buy. 

We do, however, directly support specific businesses when we buy their products or services. We support oil and gas companies every time we put fuel in our cars. That includes powering electric vehicles because much of the world’s electricity (about 63 percent) still comes from fossil fuels. According to Our World In Data, almost 85 percent of the global energy mix (this includes heating homes) comes from non-renewable sources.

In a nutshell, here’s how to grow rich, happy, and help the environment:

Buy less. Consume less.

That’s the investment I’m talking about.

A pure capitalist might say, “That’s bad advice. If everyone does this, it will reduce corporate profits and hamper future stock returns.”

But if we buy less, we will also need less.

What I have to say next won’t get me invited to your next birthday party. But I’ll say it anyway.

We are a society of over-consumers. And yes, that almost certainly includes you.

You might consume less than your friends… maybe a lot less. But like me, you still very likely consume too much.

Have you ever replaced a car that worked perfectly fine?

Have you renovated a kitchen or bathroom because it didn’t look right?

Do you buy bottled water?

Have you bought new furniture to match a room?

Do you buy to fit a fashion? Clothes? Glasses? Shoes? Chairs? Lights?

Have you replaced or upgraded sporting equipment that worked just fine?

These are signs of over-consumption.

When we buy less stuff, two great things happen.

First, it allows us to save and invest a lot more money. This has a massive, long-term impact on our wealth. By buying less, we can double, triple or even quadruple our retirement income, compared to what it otherwise would have been.

Second, when we refrain from purchasing what we don’t need, we directly encourage less mining, less deforestation, less pollution through the packaging and transport of goods, and less material that eventually ends up in landfills or toxic incinerators. It also makes our air and water cleaner.

Recycling is good. But if we don’t buy something in the first place, we don’t need to recycle it.

What’s more, according to environmental researcher and spokesperson, Annie Leonard, much of what we think gets “recycled” simply doesn’t. And even when it does, recycling takes energy.

That has a negative environmental impact from the transportation of recyclables (using fossil fuels) to the breakdown of that product, as it gets recycled. The repurposing of that material takes energy too.

And then we ship it. Again. Energy.

Some people might think, “But I like to buy stuff. It makes me happy.” But behavioural research suggests that’s humanity’s great delusion.

Material acquisitions almost never boost our life satisfaction because of something called, hedonic adaptability. Whether it’s a new car, renovated living room or a fancy new handbag, we get used to what we own.

In a powerful twist, when we choose not to buy something because of an environmental decision, this makes us happier.

That’s according to psychology professors Kirk Warren Brown and Tim Kasser. To test subjective well-being, they asked young students and adults, “How would you say you are feeling these days?”

The researchers provided a five-point scale, from “very unhappy” to “very happy.” At a different time, they asked the subjects about their environmentally conscious habits.

They found that the more environmentally conscious people reported being happier.

This is similar to researched findings on those who help others. Doing so increases our life satisfaction. And as I referenced in my book, Balance, it also boosts our health.

We can’t buy our way towards helping the environment, boosting our wealth, health or life satisfaction. That doesn’t work.

Electric cars offer a solution to a cleaner future. But even when we buy an electric car (especially if we replace a car that is running fine) we rarely consider the excessive mining required for its materials; the source of the car’s running electricity (it’s often fossil fuels); and the disposal of that battery, years down the road.

Buy less.

Drive less… whether electric or otherwise.

Fly less.

You’ll grow wealthier. You’ll be happier. You’ll pave a better future for your children, your grandchildren and (if we do this right) their grandchildren too.

Best of all, you won’t have to poop in a bucket while squatting in a tree.