We have seen environmentally oriented mutual funds pop up since the oil scare of the 1970s. However, investor interest was not sustained and some funds dried up. More recently, the conviction that alternative forms of energy will be necessary to meet global demand in coming decades has lead to responses by regulatory, corporate, consulting and other groups. Investors see that thinking green will be more than a passing fad.

“Going Green” and Risks of “Investing Green”

The term has different meanings to different people and, unfortunately, to different managers and mutual funds. You need to be careful (1) that the fund invests in a way that you consider “green” and (2) that, in so doing, it has the potential to do well over time (i.e., its environmental goals do not frustrate its investment goals). The funds may be large cap, for global impact, or smaller cap, for more localized impact. The managers may not have experience with the new technologies. Furthermore, regulations are changing, which could have an impact on the companies in which the funds invest. Furthermore, large or small cap, the fund may not be well diversified because there are few companies that meet their investment criteria. So, you need to be careful in your selection.

As we said below, you may be better off to recycle, purchase conscientiously, invest well, and contribute to causes that will have a global impact rather than hoping for “making green from going green”.