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Green Funds

Green Funds

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Published by: abcdefghi_123456789 on Aug 06, 2010
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Green funds
are mutual funds that invest in socially-responsiblecompanies that do not take part in immoral or unethical activities.As a rule of thumb, this typically excludes tobacco and gamingcompanies, as well as those with questionable labor practices or environmental policies. Eco-minded individuals are putting their money where their conscience is -- into "green" investments thatsupport the environment. This can include efforts to reverse globalwarming, clean the earth's oceans, develop alternative energy, andgenerally speed our progress toward sustainability. As a result, thereare now hundreds of public companies that tout their greenness,dozens of green mutual funds, and even a handful of green stock market indexes.Thus green fund will only invest in companies that are deemedsocially conscious in their business dealings or directly promoteenvironmental responsibility.A green fund can come in the form of a focused investment vehiclefor companies engaged in environmentally supportive businesses,such as alternative energy, green transport, water and wastemanagement, and sustainable living.One of the first mutual funds to incorporate socially responsiblescreening was the Pioneer Fund (PIODX), which has avoided thestocks of companies whose primary business is alcohol or tobaccosince 1950.The market has expanded since then so that there are more than 200mutual funds and roughly a half-dozen exchange-traded funds thatinvest using one or more social or environmental criteria. There arenow SRI funds that are balanced, focus on equities, seek internationalsecurities, invest in bonds, track indexes and invest in money marketinstruments.
Green investing is a philosophy that promotes steering investmentdollars toward green companies and projects. The definition of agreen company varies among investors. For some, it means thecompany is engaged in solving environmental problems -- developingalternative energy sources or producing organics, for example. Forothers, a company qualifies as green if it recycles, conserves naturalresources, and generally conducts business in an environmentallyconscious way.A green fund's strategy can be based on avoiding negative companycriteria (businesses such as guns, alcohol, gambling, pornography,animal testing, etc.), choosing positive company criteria(environmental programs, energy conservation, fair trade, etc.), or acombination of both strategies.In addition to basic quantitative analysis, a sociallyresponsible portfolio manager takes into account a company'scommunity investment, environmental responsibility, protection of human rights, employment diversity, animal testing and productoffering.Companies that produce weapons, gambling facilities, alcohol andtobacco are also often excluded. Because individuals have varyingvalues, beliefs and investment goals, there are a number of differenttypes of socially responsible mutual funds available. Some mightinclude only equities or bonds, while others might hold acombination of the two.Furthermore, some funds might specialize in being free of securitiesfrom alcohol, casino and tobacco companies, while others mightinvest exclusively in companies that are environmentally responsible.
A green fund's strategy can be based on avoiding negative companycriteria (businesses such as guns, alcohol, gambling, pornography,animal testing, etc.), choosing positive company criteria(environmental programs, energy conservation, fair trade, etc.), or acombination of both strategies.Based on performance, it is not yet clear whether green funds andsocially responsible investing can consistently create better returnsfor investors. But they do represent a proactive step towardenvironmental consciousness, which many investors appreciate.Socially conscious investing is on the rise, which is due largely toincreased worldwide exposure to the issue, as well as increasedfederal funding for alternative energy and other programs.Generally, these seven areas are the focus of socially responsibleinvestors:1.
Corporate governance and ethics2.
Workplace practices3.
Environmental concerns4.
Product safety and impact5.
Human rights6.
Community relations7.
Indigenous peoples' rightsIt should be noted that socially responsible investing is essentiallyinterested in promoting the adherence to the positive aspects of these areas with publicly held companies. However, SRI also gets alot of attention for industries and companies that it opposes as "bad"for society. The latter would include, among others, businessesinvolved in gambling, tobacco, weapons and alcohol. These so-called"sinful" investment categories are often eliminated through SRIscreening.

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