Green energy is definitely in vogue right now. Examples include fuel cell technology, solar energy, bio fuels, wind energy and other products and services that support efficient and renewable energy. Other endeavors may be experiencing a credit crunch, but investing in energy conservation, sustainable energy and resource maximization is on the rise. Where does the money come from, and for what is it being used? (Learn more about green investing in What Does It Mean To Be Green?)

Here are a few examples:

Venture Capital

Cash has been pouring into green energy firms from venture capital investors for several years. As the economy starts to rebound, the firms are working harder to solicit funding from investors to support startup and growth firms. New monies are more difficult to capture, because investors are less liquid and credit is more difficult to obtain. Nonetheless, venture capital firms are still on the hunt for potential new additions to their portfolios. Examples include the Massachusetts Green Energy Fund and Hudson Clean Energy Partners, which recently closed after raising $1 billion.

Investment Banks

Major investment bankers have established market segments devoted to renewable energy and clean technology. Whether it is initial public offerings (IPOs), growth through secondary offerings or even loans, the potential profits continue to entice new investments. UBS, Deutsche Bank and Goldman Sachs are all funding projects ranging from wind energy to solar energy.

The World Bank is financing U.S. clean technology initiatives. The funding helps U.S. firms develop and market new technology. The efforts have the potential to impact worldwide energy demand. U.S. firms benefit when domestic financing is scarce.

Mutual Funds

Mutual fund managers attempting to take advantage of the economic recovery are including stable investments with fast-growth potential in their portfolios. Some have established funds dedicated to green energy. The T. Rowe Price New Era Fund contains a host of natural resource companies. Many are pursuing renewable energy projects. (Whether you want funds or stocks, find out how to evaluate planet-friendly portfolio picks in Evaluating Green Equity Investments.)

Government Funding

The American Investment and Recovery Act of 2009 has provisions for clean energy including smart grid funding, energy efficiency grants, clean coal, research and tax credits for green energy production. Some of the moneys were in the form of grants to state and local governments and existing organizations. Recent pressures to curb unemployment are encouraging the White House to consider additional tax incentives for green technology. While the economic stimulus money does trickle down to firms for renewable energy, government energy grants are not new and will probably continue as long as the U.S. continues to rely heavily on foreign energy sources.

The U.S. Department of Energy funds the Database of State Incentives for Renewables & Efficiency. The database contains funding resources listed by state. Green energy sources can access the database through the organization's website.

The U.S. Department of Commerce helps U.S. firms export clean energy products and services. Emerging markets abroad with increasing energy demands represent fast-growing opportunities for U.S.-based green energy companies.

Bottom Line

While individual investors knowingly invest in green energy through mutual funds, U.S. taxpayers also provide funding through government grants and tax incentives. Investing in future energy advances is more than just a socially responsible act; it could lead to real profits. Financiers realize the potential as well as investors, governments and wealth managers.

Related Articles
  1. Economics

    India: Why it Might Pay to Be Bullish Right Now

    Many investors are bullish on India for all the right reasons. Does it present an investing opportunity?
  2. Investing

    Retirees: 7 Lessons from 2008 for the Next Crisis

    When the last big market crisis hit, many retirees ran to the sidelines. Next time, there are better ways to manage your portfolio.
  3. Products and Investments

    There's a Reason They're Called Junk Bonds

    The closing of Third Avenue Managemet's Focused Credit Fund is a warning to investors and advisors. Beware the junk.
  4. Mutual Funds & ETFs

    Top 3 PIMCO Funds for Retirement Diversification in 2016

    Explore analyses of the top three PIMCO funds for 2016 and learn how these funds can be used to create a diversified retirement portfolio.
  5. Mutual Funds & ETFs

    The 3 Best Downside Protection Equity Mutual Funds

    Learn how it is possible to profit in a bear market by owning the correct selection of mutual funds that provide downside protection and opportunity.
  6. Economics

    Industries That Thrive On Recession

    Recessions are not equally hard on everyone. In fact, there are some industries that even flourish amid the adversity.
  7. Mutual Funds & ETFs

    The 4 Best Lord Abbett Mutual Funds

    Discover the four best mutual funds administered and managed by Lord, Abbett & Co., LLC that offer investors a wide variety of investment strategies.
  8. Mutual Funds & ETFs

    The ABCs of Mutual Fund Classes

    There are three main mutual fund classes, and each charges fees in a different way.
  9. Entrepreneurship

    10 Characteristics Of Successful Entrepreneurs

    Do you have the qualities of a successful entrepreneur? Those who do tend to share these 10 traits.
  10. Mutual Funds & ETFs

    The 3 Best Vanguard Funds for Value Investors in 2016

    Find out which of Vanguard's value funds are the best for building a solid core-satellite value investing strategy for your portfolio.
RELATED FAQS
  1. Are target-date retirement funds good investments?

    The main benefit of target-date retirement funds is convenience. If you really don't want to bother with your retirement ... Read Full Answer >>
  2. Do mutual funds require a demat account?

    A dematerialized account enables electronic transfer of funds. The account is used so an investor does not need to hold the ... Read Full Answer >>
  3. How liquid are Vanguard mutual funds?

    The Vanguard mutual fund family is one of the largest and most well-recognized fund family in the financial industry. Its ... Read Full Answer >>
  4. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  5. Does OptionsHouse have mutual funds?

    OptionsHouse has access to some mutual funds, but it depends on the fund in which the investor is looking to buy shares. ... Read Full Answer >>
  6. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
Hot Definitions
  1. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  2. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  3. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  4. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
  5. Dark Pool Liquidity

    The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is ...
Trading Center