Green Fund

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.


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 see as valuable. 

Some have cited green investing as having begun in earnest during the 1990s, a period where investors were more seriously taking into account the harm businesses or entire industries industries were putting on the environment. In the wake of headline-grabbing events like the Exxon Valdez oil spill, and large and protracted fights over logging rights in the Pacific Northwest, a set of investors began to view businesses that were better at managing their environmental impact as more valuable than those who couldn't. These types of businesses, in some investors eyes, were not only operating in a more ethical manner, but had a competitive advantage over companies who were ill equipped to reduce their impact on the environment. Still other investors saw an ethical obligation in investing in technologies and businesses that were looking to build a sustainable society through renewable energy sources.

Some of the sectors where this investment has been taking place include the renewable energy, and buildings and efficiency sector. The renewable energy sector is a broad one, including solar energy, wind, battery and energy storage technologies, as well as the materials that help make those technologies possible. The buildings sector includes builders who use energy-efficient materials, making each building's carbon footprint smaller - whether they're being used for commercial, residential, or office use.

Socially conscious investing has continued to gain popularity, which is due largely to increased worldwide exposure to the issue of climate change, as well as increased federal funding for alternative energy and other programs. Since 2007, the Green Transition Scoreboard, a project run by Ethical Markets Media and The Climate Prosperity Alliance, has tracked $6.2 trillion invested in the green economy, more than halfway to the goal of $10 trillion invested by 2020.