Green Fund

A green fund is a mutual fund or another investment vehicle that will only invest in companies that are deemed socially conscious or directly promote environmental responsibility. A green fund can come in the form of a focused investment vehicle for companies engaged in environmentally supportive businesses, such as alternative energy, green transport, water and waste management, and sustainable living.

Green funds are investment funds whose portfolio is largely based on Environmental, Social, and Governance (ESG) criteria.

Based on performance, it is not yet clear whether green funds and socially responsible investing (SRI) can consistently create better returns for investors, but they do represent a proactive step toward environmental consciousness, which many investors see as valuable. Some have cited green investing as having begun in earnest during the 1990s, a period where investors were more seriously taking into account the harm businesses or the pressure entire industries were putting on the environment.

In the wake of headline-grabbing events like the Exxon Valdez oil spill and protracted fights over logging rights in the Pacific Northwest, a set of investors began to focus their attention and resources on those businesses that were better at managing their environmental impact than more traditional enterprises.

For some investors, these businesses were not only operating in a more ethical manner but also had a competitive advantage over companies who were ill-equipped to reduce their impact on the environment. Others saw an ethical obligation to invest in technologies and businesses that could contribute to building a sustainable society through renewable energy sources. Green funds invest in areas such as renewable energy, and buildings and efficiency sectors. The renewable energy sector is a broad one, including solar energy, wind, battery, and energy storage technologies, as well as the materials that help make those technologies possible.

The buildings sector includes builders who use energy-efficient materials, making each building’s carbon footprint smaller—whether they’re being used for commercial, residential, or office use.

Socially conscious investing has continued to gain in popularity, largely due to increased worldwide exposure to the issue of climate change, as well as increased federal funding for alternative energy and other programs. Since 2009, the Green Transition Scoreboard, a project run by Ethical Markets Media, has tracked a cumulative $10.39 trillion invested in the green economy through the end of 2019.

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