Green Living, Wealth Building: The Financial Rewards of a Sustainable Lifestyle
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Reading time: 10 minutes
Disclaimer: I am not a financial adviser, and this content is for informational and educational purposes only. Please consult a qualified financial adviser for personalized advice tailored to your situation.
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Green Living, Wealth Building: Exploring the Financial Rewards of a Sustainable Lifestyle
This personal finance blog aims to increase financial literacy and guide you on the path to achieving financial independence. Achieving financial independence and wealth-building requires strategic saving and smart investing, allowing you to reach the ‘crossover point’, where you can live off investments and make employment optional. For many, financial independence happens at traditional retirement age, where retirees live off a combination of pensions, savings, and investments. However, with strategic planning, financial independence can be achieved much earlier.
Exploring Green Living and Financial Independence: How Can Sustainability and Wealth Building Intersect?
Today, we’ll explore the synergies between a ‘sustainable, eco-friendly lifestyle’ and the journey to financial independence and financial freedom. The reason for adding quotation marks is that defining what a ‘sustainable lifestyle’ is can be tricky–embracing a green lifestyle can mean different things to different people. This can be taken to the extreme to nearly comical levels. For instance, my boomer generation parents think they are green because they advocate publicly with friends and family for the need for climate change mitigation and because they support a political party that is marginally more concerned with solving climate change in the country they live in. Similarly, my mother in law thinks she is green because they compost their food scraps in their back yard.
Despite their good wishes for the environment, there is no critical questioning of their lifestyle or any attempt to introduce any substantive changes into their lives. This is unsurprising, given that their generation has been largely responsible for driving the problem in the first place and then hiding or being paralized from implementing meaningful solutions to solve it. Thankfully, many millennials and Gen-Zs–who will end up paying for this lack of action–think differently and observe a more coherent alignment between what they believe in and what they live by.
Today’s post will (1) set out to identify a simple framework of what a sustainable lifestyle could look like and (2) identify synergies with reaching financial independence. Specifically, we want to address the following questions: can green living be aligned with wealth building? Which areas offer more synergies between green living and wealth building and which one’s present more tradeoffs?
What Does a Sustainable Lifestyle Really Look Like? Key Principles and Misconceptions
Before jumping in, it is important to note that the term ‘sustainability’ can encompass many different areas, e.g., climate change, ozone depletion, water eutrophication, land use change, and many others. Here, I will simplify by considering only the climate change category and its associated GHG emissions, given the dramatic short-term consequences of inaction in this category. In spite of this simplification, actions that tackle climate change are typically beneficial for the other categories. For instance, reducing your animal protein intake reduces greenhouse gas (GHG) emissions but also contributes significantly to biodiversity protection and reduced land use change.
Generally, my intention here is not to be prescriptive about what a sustainable lifestyle should look like, because everyone’s journey toward sustainability may differ based on values, circumstances, and capacities. Instead, we’ll cover high impact actions individuals can take which hold the largest potential to reduce greenhouse gas (GHG) emissions, as highlighted by the IPCC.
Photo by Karsten Würth on Unsplash.
High-Impact Areas for Reducing Greenhouse Gases: Energy, Transport, Food, and Consumption
Environmental sustainability has several critical categories where impactful change is most likely to be found. When it comes to reducing GHG emissions, the three critical areas commonly identified by scientists are energy, transport, and food. In addition to these three, we will also add a fourth “consumption” category, since consumption patterns also play a critical role in our environmental impact. Let’s break each of them down in a bit more detail before describing how action in each one of them relates to financial independence.
Energy: This category includes both the amount of energy we use in our day-to-day lives but also the sources from which it is derived. The choices we make about electricity and heating can have substantial differences in terms of environmental impact. For instance, changing to renewable energy sources, such as solar or wind, reduces our reliance on fossil fuels. Additionally, investing in energy-efficient appliances or engaging in behavioral changes can lead to substantial reductions in energy consumption over time.
Transport: How we decide to move around–car, public transport, bike, or on foot–heavily determines our carbon footprint. Driving a fuel-intensive vehicle results in significantly higher GHG emissions compared to smaller, fuel-efficient cars. When possible, using public transport, cycling or walking can dramatically lower one’s personal contribution to GHG emissions.
Food: Research shows that our dietary choices significantly impact our efforts to reduce greenhouse gas emissions. Specifically, focusing on what we eat rather than where it comes from. Reducing consumption of animal products, especially beef, is one of the most impactful dietary changes for a sustainable lifestyle. Many erroneously think that where we grow food has the largest impact, but this is not really aligned with the latest science; looking at the whole life cycle of food products’ GHG emissions, transport represents consistently a relatively minor contribution across food items. A second key leverage here is focusing on reducing food waste–another large source of emissions and a relatively easy one to tackle.
Consumption: Finally, our general consumption habits, from fashion to electronics, contribute significantly to our environmental footprint. Every product we buy requires resources and energy to produce, and disposal contributes to environmental challenges, emphasizing the importance of mindful consumption. Overall, the largest leverage here is being mindful of one’s purchases–being able to distinguish needs versus wants–and attempting to reduce waste where possible (e.g., through reusing).
A Practical Framework for Sustainable Living: How to Make Meaningful Changes Without Complexity
Comprehensive carbon footprint calculators are freely available online, yet in my experience most people find them difficult and time-consuming to use. It is also unnecessary for everyone to record their individual household footprint and see how it changes over time. We just need to get the big ticket items right, we don’t need to get tangled in the weeds. Therefore, we propose a simplified framework based on the four high-impact areas—energy, food, transport, and consumption—outlined in Table 1. This approach makes it easier to visualize progress and identify areas where small changes can make a big difference. Take five minutes to fully understand the table below and you’ll gain a clear overview of essential climate change mitigation strategies that effectively reduce environmental impact. If we manage to tackle some of these components, we will be truly driving meaningful change.
Table 1: Key areas to leverage the largest reduction in environmental impact (energy, food, transport, and consumption) and different levels of effort: level 1 represents least effort or the baseline, level 2 represents some progress, while level 3 represents the largest GHG emission reductions achieved.
| Category | Level 1 | Level 2 | Level 3 |
|---|---|---|---|
| Energy | • Electricity sourced from grid mix, primarily fossil fuels • Household heating relies on fossil fuels • Minimal consideration for energy efficiency |
• Transition to renewable energy for either electricity or heating (partial transition) • Actively practicing energy efficiency (e.g., mindful of heating/cooling usage, efficient appliances) |
• 100% renewable energy for electricity • Household heating sourced from low emission sources • High commitment to energy efficiency through optimized appliance use and low-consumption habits |
| Food | • Diet predominantly includes animal products, including red meat • Little to no attention to food waste reduction |
• Primarily plant-based diet, with occasional meat consumption (e.g., 1-2 times per week) • Proactive efforts to reduce food waste (e.g., meal planning, portion control) |
• Fully plant-based diet (vegetarian or vegan) • Committed to zero food waste through careful planning, preservation, and composting as needed |
| Transport | • Heavy reliance on fossil-fuel-powered vehicles • High frequency of car usage with no effort to reduce impact |
• Shift to electric or hybrid vehicles, with reduced reliance on car use overall • Where feasible, practices carpooling and combines trips to minimize emissions |
• Primarily uses public transportation, biking, or walking for daily commutes • Occasional use of shared or rental vehicles |
| Consumption | • Enjoys regular mall shopping and online purchases, especially for non-essential items • Frequent impulse purchases influenced by advertising, especially on platforms like Amazon |
• Minimizes shopping at malls; actively aware of the impact of advertisements and curbs impulse buying • Makes conscious efforts to buy only necessary items and seeks out more sustainable or ethical brands |
• Clearly distinguishes between needs and wants, practicing minimalism • Adopts principles of reduce, reuse, recycle, and upcycle; frequently purchases second-hand when possible • Favors a circular economy approach, emphasizing durability and repairability over convenience |
In the proposed framework above, we have three levels of commitment across the 4 major mitigation categories. Level 1 can be interpreted as a baseline, which presents little to no mitigation. In Level 2 you are starting to take meaningful steps in the right directions with modest GHG emission reductions in relation to average behavior. Finally, Level 3 practices correspond to someone fully committed to sustainable practices within the category. As mentioned earlier in the post, defining what a ‘sustainable lifestyle’ is challenging and you rarely get a ‘yes’ or ‘no’ answer. Instead, my hope is that this framework will help you identify those areas that would be suitable for you to tackle next.
I am certainly open to feedback and discussing how to improve this framework further–I see this as a live framework intended to be informative and useful, not prescriptive. If you have some contributions to improve it or any other questions or comments, please reach out in the comments section below. Alright, now let’s see how this ties in to our path to achieving financial independence.
Aligning Green Lifestyle Choices with Financial Independence: Finding Synergies and Tradeoffs
Next, let’s go back to one of our initial questions–are there synergies between taking climate action and reaching financial independence? Can green living be aligned with wealth building? Broadly, we can see three different scenarios. First, some of the actions discussed across the four categories can be fully aligned with accelerating your path to reaching financial independence. For instance, reducing food waste is an easy win for both the environment and for reaching financial independence sooner–it allows you to save more money, increase your savings rate, and invest more money each month into your portfolio in index funds. These items are identified in Table 2 below in green. Second, we can find a series of actions which are either unrelated, only partially aligned, or maybe depend on context and on how they are implemented. In this second category it is not so clear whether there is a synergy or tradeoff–hence, these cells are colored in yellow below. Finally, there may be a set of actions where you are taking action for the environment, but it hurts substantially your finances, potentially setting you back in your financial independence journey. These cells are colored in red.
Table 2. Alignment of climate actions (level 2-3) across four different categories (energy, food, transport, consumption) with financial independence. Color code: synergies (green); unclear (yellow); tradeoffs (red).
| Category | Level 1 | Level 2 | Level 3 |
|---|---|---|---|
| Energy | • Electricity sourced from grid mix, primarily fossil fuels • Household heating relies on fossil fuels • Minimal consideration for energy efficiency |
• Transition to renewable energy for either electricity or heating (partial transition) • Actively practicing energy efficiency (e.g., mindful of heating/cooling usage, efficient appliances) |
• 100% renewable energy for electricity • Household heating sourced from low emission sources • High commitment to energy efficiency through optimized appliance use and low-consumption habits |
| Food | • Diet predominantly includes animal products, including red meat • Little to no attention to food waste reduction |
• Primarily plant-based diet, with occasional meat consumption (e.g., 1-2 times per week) • Proactive efforts to reduce food waste (e.g., meal planning, portion control) |
• Fully plant-based diet (vegetarian or vegan) • Committed to zero food waste through careful planning, preservation, and composting as needed |
| Transport | • Heavy reliance on fossil-fuel-powered vehicles • High frequency of car usage with no effort to reduce impact |
• Shift to electric or hybrid vehicles, with reduced reliance on car use overall • Where feasible, practices carpooling and combines trips to minimize emissions |
• Primarily uses public transportation, biking, or walking for daily commutes • Occasional use of shared or rental vehicles |
| Consumption | • Enjoys regular mall shopping and online purchases, especially for non-essential items • Frequent impulse purchases influenced by advertising, especially on platforms like Amazon |
• Minimizes shopping at malls; actively aware of the impact of advertisements and curbs impulse buying • Makes conscious efforts to buy only necessary items and seeks out more sustainable or ethical brands |
• Clearly distinguishes between needs and wants, practicing minimalism • Adopts principles of reduce, reuse, recycle, and upcycle; frequently purchases second-hand when possible • Favors a circular economy approach, emphasizing durability and repairability over convenience |
As observed in the table above, the vast majority of climate actions are fully aligned with saving money and accelerating financial independence. A few items in the energy sector were categorized in yellow: for electricity, it is quite clear that solar pannels now save you money in most countries over the mid term; however, for household heating, I believe there is more uncertainty to finding cheaper sources of alternative energy in many countries, so here we don’t have a perfect alignment between a climate change mitigation strategy and financial benefits. Similarly, whether you save money on an electric car may depend largely on the model you go for or on other factors.
The only clear tradeoff in my view is on the consumption part related to buying more sustainable or ethically-sourced products. These are generally going to be more expensive, although you could argue as well that these products generally will last longer. In any case, the broader picture of the overall consumption category is clearly strongly aligned with accelerating your journey to financial independence (green): by engaging in level 2 and 3 climate actions, e.g., minimizing wants, avoiding impulse buying, and engaging in the reuse economy, you will increase your savings rate and reduce your timeline to reaching financial independence.
Can Individual Lifestyle Changes Drive Systemic Impact?
Before letting you go to read another post (see the full list of posts further below), I’d like to share a caveat. I want to make clear that I don’t think it will be individual-driven behavioral change which will solve the crisis–it is unfortunately too late for this. The large scale, meaningful change needed to address our environmental challenges will likely be driven by a combination of government policies and private sector drive. Still, in spite of not being a silver bullet, research does show that individual efforts to change lifestyles do contribute to reduce emissions. Moreover, companies and governments are also more likely to take action if they perceive a cultural shift towards more sustainable lifestyles. This is already taking place at a rapid pace in the private sector, where major global companies are increasingly subscribing to SBTI’s science-aligned net zero targets. Companies increasingly fear losing market share if they are not perceived to be aligning their business models with decarbonization efforts. Let’s each do our part, knowing that small changes contribute to a larger movement—and at the same time bring us closer to our personal finance goals.
Photo by Artem Sapegin on Unsplash.
Enjoyed this post? Don’t miss our post on Vicky Robin’s 8 lessons frugality or our post on embracing stealth wealth for financial independence.
