Make sure the company is profitable, and check out the customer base. Read the risk factors in the prospectus for a sobering picture of what could go wrong.
One way to find funds that invest in green companies is to contact socially responsible investing organizations. The Social Investment Forum (www.socialinvest.org), a financial industry association with an emphasis on ethical investments, puts out regular reports on the state of the industry. As of 2007, there were 260 mutual funds that marketed themselves as having been screened as socially or environmentally responsible investments.
But experts urge caution even when dealing with such professionals. A 2007 Consumer Reports survey showed that most socially responsible mutual funds had lower returns and higher expenses than their mainstream counterparts.
Doug Sandler, chief equity officer for Riverfront Investment Group, is waiting for household-name companies to sort the market out. He expects fledglings to give way to veterans with cash stockpiles, reliable manufacturing and global scale.
"Some of these smaller companies will plow the field," he said, "but when it comes time to harvest, the big companies will be the beneficiaries."
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david.pierson@latimes.com
edward.silver@latimes.com
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How some green funds did in '08
Here are some better-known exchange-traded funds that green investors use to broaden their exposure, including stakes in overseas companies. As their 2008 performances show, stocks in these industries can be volatile and risky.
PowerShares WilderHill Clean Energy Portfolio (PBW)
Closed at $8.62 a share
Dec. 31, down from $19.55
on June 30
Top holdings as of Oct. 31:
* Ener1 Inc.
* Raser Technologies Inc.
* Applied Materials Inc.
Market Vectors Global Alternative Energy ETF (GEX)
Closed at $23.35 a share
Dec. 31, down from $51.23
on June 30
Top holdings as of November:
* Vestas Wind Systems
* First Solar Inc.
* Verbund
Claymore/MAC Global Solar Energy Index ETF (TAN)
Closed at $8.77 a share
Dec. 31, down from $25.80
on June 30
Top holdings as of Dec. 31:
* First Solar Inc.
* Q-Cells
* Renewable Energy Corp.
First Trust Global Wind Energy ETF (FAN)
Closed at $12.52
a share Dec. 31, down from $28.90 on June 30
Top holdings as of Dec. 31:
* Vestas Wind Systems
* Iberdrola Renovables
* EDP Renovaveis
PowerShares Water Resources Portfolio (PHO)
Closed at $14.39
a share Dec. 31, down from $20.71 on June 30
Top holdings as of Dec. 31:
* Itron Inc.
* First Solar Inc.
* Veolia
Sources: Company websites, Yahoo Finance
