Earthy investors are seeing more green
NEW YORK — Maury Schoenwald, a co-manager of the New Alternatives Fund, an environmental fund, admits that he was never in the business just for the sake of hawking mutual funds.
"People would ask us, 'What's your beta?' For a long time I didn't even know we had a 'beta' [a statistical measure of risk]," he says. "Or they'd ask, 'Are you a value fund or a growth fund?' I'd say, 'Value? Growth? We're an environmental fund! We care about the resources of our land.' "
Welcome to the world of green investing, where what you invest in - a fuel-cell company, for example, or a maker of wind-power applications - can be more important to investors than a mutual fund's short-term profits.
Green investing - that is, pure green investing - is a very small subsegment of the larger socially responsible investing (SRI) category of mutual funds. SRI funds use a series of built-in screening programs to keep out firms that make munitions or handguns, discriminate against minorities and women, or are linked to tobacco, liquor, or gambling. The funds also "screen in" firms that have positive social or environmental records. "Taken as a group, SRI has shown that it can perform about as well as non-socially responsible investing," says Emily Hall, an analyst with Morningstar, a financial-information firm in Chicago.
Often, SRI has actually outperformed the industry. In 1999, many SRI funds did particularly well, propelled in part by portfolios laden with technology firms. This year, SRI funds, despite sharp losses in the technology sector, have still managed to beat a number of benchmarks.
The 54 socially responsible funds tracked by Morningstar, for example, were up a little more than 6 percent through the first quarter ending March 31, compared with a gain of 2.3 percent for the Standard & Poor's 500 Index.
Tracking the returns of pure green funds, however, is more complicated. Tracking firms, such as Morningstar, do not break out these funds as a separate investment category.
A pure green fund buys companies linked mainly to the land, natural resources, or the replenishment and sustainability of the earth.
Many green funds, says Ms. Hall, "are very small," which makes monitoring very difficult. The larger and better-known of the green funds include Green Century Balanced Fund (617-482-0800), New Alternatives Fund (800-423-8383), and Portfolio 21 Fund (877-351-4115).
Several large mutual-fund groups including Fidelity have their own "environmental" funds. But few people within the SRI community see them as "pure play" environmental funds, says Cliff Feigenbaum, editor of GreenMoney Journal, a quarterly newsletter, and co-author of "Investing With Your Values" (Bloomberg Press).
One major objection he has: Some of the larger funds hold waste-management firms that are often considered polluters.
True green funds, by contrast, use very restrictive selection screens. "We have some 36 companies in our portfolio," and they all have links to environmental issues, says Mr. Schoenwald, manager of the New Alternatives Fund.
The fund, started in 1982, has $40 million in assets. It has returned about 10 percent annually over time, although this year it is up 51 percent for the 12 months ending March 31.
Companies in the portfolio include AstroPower, a solar-cell company; First Albany, a financial firm with investments in alternative-energy firms; and Idaho Power, a utility that focuses on generating energy from the upper Snake River, not lower Snake, says Schoenwald, thus not injuring fish runs.
Why buy into pure green funds? Because putting 5 percent or 10 percent of your assets into such a fund can be emotionally satisfying, says Hall.
Still, she prefers to buy into broader SRI funds that may have a green component, such as Domini Social Equity Fund, or Green Century Equity Fund.
Even green investors need "to be very practical" about their investing, Hall says. Look for funds, she says, with a solid track record, strong managers, and low expenses.
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