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.

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