A green fund is a mutual fund that invests in socially-responsible, environmentally friendly, often sustainable and green companies.
Green funds are part of green investing in green and sustainable companies and have emerged because of the growing number of investors seeking ethical investments outside of those companies with questionable labor practices, environmental policies, unethical or immoral activities.
Typically you will not find tobacco companies, pharmaceutical companies, oil or big polluting industrial companies in green fund investments.
Methodology of Green Funds
Each green fund will have different methodologies for determining what constitutes an environmentally-friendly or green company. Not all green funds stress exactly the same values. Some fund managers will avoid certain industries altogether like oil and gas, while others will look at the environmental records of particular companies and their attempts to become more sustainable. Other funds will avoid any company in an unacceptable industry, according to their parameters, despite the company's individual environmental record.
If you are looking for socially responsible and green investments it is advisable to check out each fund’s prospectus as each green fund describes its methodology in its prospectus. A phenomena that use to happen in the green investment industry, especially when it first began, was that some dubious companies would creep in without the investor being told or the fund manager up front about it. If you are particularly concerned about where you money is invested we suggest you ask for a complete list of companies the funds have in the past or currently hold stocks in.
There is no guarantee that your green fund will outperform a normal mutual fund. So don’t expect a greater return on your investment just because you have good karma. If only it were that simple. Generally green funds hold their own when it comes to return on investment.
Especially today when people are becoming more conscious of the world’s ills and who has caused them as well as more green companies listing themselves on the stock exchange. There are plenty of green investment opportunities today than yesteryear and always the best place to start is with doing a little bit of research online at the various green fund investment companies.
