Green Investing

With all the talk about climate change, rising seas, melting polar caps and no rain fall, this week we will be looking at the new buzz phrase, 'green investing'. As the name implies, green investing basically means investing in companies that are environmentally responsible. There has been increasing attention from the world-wide media that global warming is not just a short-term natural occurrence but a man-made problem that needs to be addressed immediately or the consequences could be severe. Al Gores "An Inconvenient Truth" is an example of this increasingly popular paradigm.

That's where so-called 'green' investing comes in; investors can either invest in the individual 'green' stocks or in a fund that specifically identifies and invests in 'green' companies.

The various fund managers will outline in their prospectus the internal criteria of what they describe as an environmentally-responsible company is. The specific criteria could include companies involved in cleaning up waste that does not decompose on its own, i.e. naturally. It could also include companies that are involved in:

• renewable energies
• organic foods to
• 'green' building investment
• 'green-friendly' fuel cells.

In theory, a time-poor 'green' investor leaves all the green analysis to the fund manager. As a point of caution, just beware to ensure that your viewpoint of what makes a company 'green' is similar to a 'green' fund manager.

Initially green-investing company funds found it difficult to perform as well as other funds due to the limitations imposed on themselves as to what type of industries and companies they considered investing in. However as global warming becomes a greater concern for all and the existence of the Kyoto and Montreal protocols, more and more companies will in the future need to find business activities that are either good for the environment or recycle current waste thereby increasing the amount of different companies to invest in.

Interestingly, many analysts now argue that there is the potential for green investment and socially responsible investment to grow much faster than all other industries.