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Sunday, October 19, 2008

Green Mutual Fund Investing

From The Hoss's Mouth

Today, Hoss Cents Free Financial Money Magazine discusses Green Mutual Fund Investing.

Green Mutual Fund Investing

There are many mutual funds that are called green, ethical, socially responsible, or that support a clean environment. In many cases a close look at their investment portfolio will reveal investments in companies one would not normally consider "Green." Why then do they bill themselves as a green mutual fund? Because they invest in companies that have socially responsible business practices. A simplified prospectus of such funds would state that the fund invests primarily in companies that:

  • show leadership in environmental practices
  • are committed to complying with environmental regulations
  • respect workers' rights
  • encourage equal employment opportunities
  • adhere to strong corporate governance practices
  • do not support the acts of repressive regimes

Further, the prospectus may also detail companies whose securities the fund intends to avoid because they produce, promote or distribute:

  • alcohol
  • tobacco
  • gaming
  • military weapons
  • pornography

Did you notice the use of the word primarily rather than exclusively and intends rather than will. The Hoss is not trying to criticize these funds, many of which are managed expertly by environmentally conscious people, and have a relatively high exposure in green. He is pointing out that to find a stand-alone or purely Green Mutual Fund will require close scrutiny of the fund's prospectus and of the companies it holds in the fund.

If the investing public demands purely Green Mutual Funds, then we will see the development of such funds alongside the current socially responsible green mutual funds.

Stay on track,

The Hoss

Next Hoss Cents Free Financial Money Magazine Post: Index Mutual Funds

Previous Post: Equity Mutual Funds

2 comments:

  1. Since you're interested in green investing, you might want to look at my site. It's one of the most popular sites on the web on the subject. It also covers the latest related global news and research too. It's at www.investingforthesoul.com


    Best wishes, Ron Robins

    ReplyDelete
  2. Unfortunately, these funds suffer from crossover problems (difficulty in managing a totally green portfolio while keeping the returns on par with not-so-green funds), higher fees and expenses (which eat up the meager returns), and too few easily identifiable companies with enough liquidity and market cap to buy (to small and the fund manager runs the risk of running up the price with one purchase; too large and they have trouble making sure the company and all of its ancillary businesses live up to the portfolio mandate).

    A good idea that even after several decades has not yet arrived for all but the most savvy green investors.

    ReplyDelete

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