Green Fund

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DEFINITION of 'Green Fund'

A mutual fund or other investment vehicle that will only invest in companies that are deemed socially conscious in their business dealings or directly promote environmental responsibility. A green fund can come in the form of a focused investment vehicle for companies engaged in environmentally supportive businesses, such as alternative energy, green transport, water and waste management, and sustainable living.

BREAKING DOWN 'Green Fund'

A green fund's strategy can be based on avoiding negative company criteria (businesses such as guns, alcohol, gambling, pornography, animal testing, etc.), choosing positive company criteria (environmental programs, energy conservation, fair trade, etc.), or a combination of both strategies.

Based on performance, it is not yet clear whether green funds and socially responsible investing can consistently create better returns for investors. But they do represent a proactive step toward environmental consciousness, which many investors appreciate.

Socially conscious investing is on the rise, which is due largely to increased worldwide exposure to the issue, as well as increased federal funding for alternative energy and other programs.

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