A:

Green investments are traditional investment vehicles (such as stocks, exchange-traded funds and mutual funds) in which the underlying business(es) are somehow involved in operations aimed at improving the environment. This can range from companies that are developing alternative energy technology to companies that have the best environmental practices.

For the stock savvy, there are many pure-play, leading edge green companies that are traded on the major stock exchanges. These include startups that are developing new methods for creating biofuels or solar panels, and traditional market cap heavyweights that are expanding their product lines to include environmentally friendly products (such as General Electric's development of wind-powered electric generators).

Green investing can also be achieved through exchange-traded funds (ETFs), which mimic the stock indexes made up of green companies. Mutual funds can be another alternative, in which case a professional portfolio manager makes the green asset allocation decisions based on the fund's prospectus.

Unfortunately, because individual beliefs on what constitutes a "green investment" vary, exactly what qualifies as a green investment is a bit of a gray area. Purchasing stock in a business that is an industry leader in terms of employing environmentally conscious businesses practices in a traditionally "ungreen" industry may be considered a green investment for some, but not for others. For example, consider an oil company that has the best record for environmental practices. While it is environmentally sound that the company is making the best precautions in preventing any direct damage to the environment through its day-to-day operations of drilling for oil, some people may object to purchasing its stock as a green investment, because burning fossil fuels is the leading contributor of global warming.

Therefore, prospective green investors should research their investments (by checking out a green fund's prospectus or a stock's annual filings) to see if an investment includes the types of companies that fit their personal definition of "green".

RELATED FAQS
  1. Does investing in sustainable or "green" companies provide lower returns?

    To determine the kinds of returns that can be expected from investments in sustainable or "green" companies, the distinction ... Read Answer >>
  2. Is there a difference between socially responsible investing (SRI) and green investing?

    Green investing is considered a subset of socially responsible investing. Both of these terms refer to investment philosophies ... Read Answer >>
  3. If my home runs power off the grid, what is the specific environmental impact?

    Going off the grid, or using solar energy, can result in much more than saving the homeowner money. It can help the planet ... Read Answer >>
  4. What does greenwashing mean?

    The term "greenwashing" was added to the Oxford English dictionary in 1999, where it is defined as "disinformation disseminated ... Read Answer >>
  5. How are blue-chip stocks similar to mutual funds and exchange-traded funds (ETFs)?

    Understand the primary differences between making investments in blue-chip stocks, mutual funds and exchange-traded funds ... Read Answer >>
Related Articles
  1. Investing

    Green Technology: a Solid Investment Choice?

    With global investing in green energy on the rise, there are abundant opportunities for environmentally responsible, financially sound investments.
  2. Insights

    What Does It Mean To Be Green?

    Green investing is the new buzz word for companies and investors. Find out what it means.
  3. Financial Advisor

    Is it Time to Invest in Green Bonds?

    Green bonds have been growing in popularity at a rapid rate, but is it too early to invest?
  4. Investing

    Challenges Faced When Analyzing Green Chip Stocks

    The fact that a green chip is not yet a blue chip should not alarm investors, but they need to be aware of the differences and challenges that can arise from assuming these are durable companies ...
  5. Investing

    How to invest in Green Bonds

    If you want to invest in a socially responsible way, green bonds may be for you. And as the market grows retail investment opportunities will grow too.
  6. Insights

    For Companies, Green Is The New Black

    Sustainability and reducing environmental impact are hot corporate objectives. Find out why.
  7. Investing

    Going Green With Exchange Traded Funds

    As investors become more environmentally conscious, the exchange traded fund market is following.
  8. Investing

    A Bond ETF with a Shade of Green

    Environmental, social and governance investing meets fixed income in this new ETF.
  9. Investing

    Green Energy: Why We're Still Not Using It

    The reason we are still dependent on fossil fuels for energy is about as old as the fossils themselves. Read on to find out why.
  10. Investing

    The Future Of Green Technology Investing

    Other endeavors may be experiencing a credit crunch, but investing in energy conservation, sustainable energy and resource maximization is on the rise.
RELATED TERMS
  1. Green Investing

    Investment activities that focus on companies or projects that ...
  2. Green Tech

    Green tech is: technology that is considered environmentally ...
  3. Green Marketing

    Marketing products and services based on environmental factors ...
  4. Green Field Investment

    A form of foreign direct investment where a parent company starts ...
  5. Greenwashing

    When a company, government or other group promotes green-based ...
  6. Green Shoots

    A term used to describe signs of economic recovery or positive ...
Hot Definitions
  1. Investing

    The act of committing money or capital to an endeavor with the expectation of obtaining an additional income or profit.
  2. Stagflation

    A condition of slow economic growth and relatively high unemployment - a time of stagnation - accompanied by a rise in prices, ...
  3. Notional Value

    The total value of a leveraged position's assets. This term is commonly used in the options, futures and currency markets ...
  4. Interest Expense

    The cost incurred by an entity for borrowed funds. Interest expense is a non-operating expense shown on the income statement. ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Pro-Rata

    Used to describe a proportionate allocation. A method of assigning an amount to a fraction, according to its share of the ...
Trading Center