green funds

8/9/2019 Green Funds

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GREEN FUNDS:-

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 gaming

companies, as well as those with questionable labor practices orenvironmental policies. Eco-minded individuals are putting theirmoney 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, and

generally 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 stockmarket indexes.

Thus green fund will only invest in companies that are deemedsocially conscious in their business dealings or directly promote

environmental 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 tobacco

since 1950.

The market has expanded since then so that there are more than 200mutual funds and roughly a half-dozen exchange-traded funds that

invest 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 market

instruments.


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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.

Generally, these seven areas are the focus of socially responsible

investors:

1.Corporate governance and ethics

2.Workplace practices

3.Environmental concerns

4.Product safety and impact

5.

Human rights

6.Community relations

7.Indigenous peoples' rights

It should be noted that socially responsible investing is essentially

interested in promoting the adherence to the positive aspects of

these areas with publicly held companies. However, SRI also gets a

lot 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 SRI

screening.


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GREEN FUNDING: A SOCIAL RESPONSIBILITY

Green investing is actually a form of socially responsible investing.

Both of these terms refer to investment philosophies that are backedby ethical guidelines that help to steer the investment selection

process. The biggest difference between the two is the overall scope

of the investment philosophies' focus: green investing is narrower in

its focus when compared to socially responsible investing.

Green investing is mainly focused on investing in companies and

technologies that are deemed to be good for the environment. This

includes individual companies that have a solid track record of

reducing the environmental impact of their operations, as wellas companies that offer alternative energy technologies such as solar

and wind power.

Green investors will also avoid investing in companies that have a

negative impact on the environment, such as companies with poor

emissions standards.

Socially responsible investing is broader in its focus in that it

considers companies that create a social and environmental

benefit, and avoids companies that have a negative effect on

society.

Companies with a strong record of charitable contributions that

provide a fair and diverse workplace, and/or that have a minimal

impact on the environment are just a few examples of social

responsibility. A major part of socially responsible investing is the

exclusion of certain industries that are deemed to have a negativeimpact on society, including those involved in alcohol, tobacco

and defense.


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GREEN FUNDING: A LEGAL RESPONSIBILITY

Green investments are no longer just a luxury, but are now a legalresponsibility, according to a new report by the United Nations

Environment Programme (UNEP) and a powerful group of assetmanagers controlling some $2 trillion in assets. The 120-page

publication released today argues that if investment consultants andothers do not incorporate environmental, social and governance(ESG) considerations into their services, they face a very real riskthat they will be sued for negligence.

It also stressed the central role that the worlds largest institutionalinvestors including pensions funds, insurance companies, sovereign

wealth funds and mutual funds have in easing the transition to alow-carbon and resource-efficient green economy. ESG issues arenot peripheral but should be part of mainstream investment decisions-

making processes across the industry, said UNEP Executive DirectorAchim Steiner.

Further, he noted that creative market mechanisms and otherincentives can help to ensure that as investors return to markets after

the current financial turmoil ends, they will put their funds into a

greener economy and not the brown economy of yesterday.

The new report, entitled Fiduciary Responsibility: Legal andPractical Aspects of Integrating Environmental, Social and

Governance Issues into Institutional Investment, was produced byAsset Management Working Group of the UNEP Finance Initiative

(UNEP FI), a partnership between the agency and more nearly 200financial institutions around the world.

It was launched on the eve of the annual Principles for ResponsibleInvestment (PRI) event in Sydney, Australia, which will draw manyof the largest institutional investors. Almost 600 institutions,representing over $18 trillion in assets, have signed up to the PRI, a

joint effort between the UNEP FI and the UN Global Compact, avoluntary initiative to promote corporate citizenship which currentlyinvolves over 5,000 companies across 130 countries.


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REASONS TO INVEST IN GREEN FUNDING

Below is a list of 5 reasons to invest in mutual funds with greenfunding:

1) Increasingly growing political agreement and support. Our current

U.S. president is a huge advocate of green funding material. When

you get the support and backing of some big political names, your

fund is assured success, at least for the short-term.

2) There are a wide variety of promising opportunities, including an

increase in the creation of clean technical companies. Investmentmutual funds with green funding would be created and investment

opportunities would rise. With more opportunities come more

awareness and ultimately more investing.

3) The creation of a vibrant market through incentives that make

green investing alluring and viable. Regulation incentives can

promote companies to be more green conscious and aware.

4) Investing in green funding material promotes a wider sectordiversification overall.

5) Answers the demands of the knowledgeable, current and socially

responsible investors. Today, investors want to know where the

money is going and how it is going to better the world we inhabit.

Green investors have a heart for doing some good in this world and

believe in the fund and the work of the investment. They believe

their money can kill two birds with one stone.


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SOURCES OF GREEN FUNDS:

Following are some sources of green funds:

PRIVATE INVESTORS Perhaps the best place to find fundingfor eco companies is through private investors. Besides having access

to great sums of money, private investors are often not tied down by

individual stockholders and boards of directors (Wenzel). Most of the

time, private investors are free to invest their money in just about

any venture they deem worthwhile. Everyone wants to make a

return on his or her investment, and todays eco conscious investors

represent the perfect place to start looking for funding.

LARGE CORPORATIONS From auto companies to oil

companies, large corporations are always looking for an edge in their

particular market or industry (Dorsey). Anyone who is at the head of

an eco company would be well served to appeal to these well known

as powerful corporations for help in funding their research and

development. With the green movement in full swing, large

corporations are eagerly looking for any investment that will help

them look more appealing to todays eco conscious consumers.

ENVIRONMENTAL ORGANIZATIONS Who better to turn to

for funding than an environmental organization? For these

organizations, investing in an eco company is almost standard

practice. If your eco company has a product that is in line with their

beliefs, the sky is often the limit as far as the amount of funding that

they might be willing to provide.

GOVERNMENT AGENCIES Government agencies probably

represent the last place you should look to for funding, mostly

because of the amount of red tape and bureaucracy that you will

certainly have to deal with. Government agencies have strict

standards and requirements regarding who, why, and how any type

of funding is distributed and used, even if the funding is designed to

benefit the environment.


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DISADVANTAGES TO GREEN FUNDING:

1. Initial Cost:The first--and perhaps most prohibitive--disadvantage to green

funding is the upfront cost. Eco-friendly funding materials are often

difficult to find in many areas of the United States, which can cause

the prices to be much higher than standard funding materials.

2. Funding:Besides the initial cost of green funding, finding a lender who offers

loans for funding that is non-traditional may be difficult. Depending

on the area of the country, there may be few, if any, lenders

available. In addition, certain restrictions may be applied by a lenderthat a homeowner or builder may find too difficult to follow.

3. Availabilityof Materials:While homeowners who live close to larger cities may have no

difficulty finding green funding materials, the selection may be

scarce in other areas. Many materials may require special ordering,

which could increase the cost. In addition, some materials may only

be available through Internet orders, which will include a cost for

shipping and handling.

4. LocationThe location may play a large role in making green funding not

feasible. Areas of the country that are more humid or moist may

preclude certain styles of green funding, such as straw bale

construction. Local restrictions and codes may also not allow use of

certain materials or funding styles.

5. Time FrameSince some green funding projects encourage the use of recycled

and found materials, time may become a disadvantage. Finding the

needed materials may take extra time that the builder and/or

homeowner doesn't have for the project.


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SOME EXAMPLES

Green financing opportunities are bases on the so-called Green

Funds Scheme. This is a tax incentive scheme of the Dutchgovernment, which only applies to the Netherlands and non-OECD

countries.

Green retail investors have a tax advantage if they invest in green

funds or bonds. Part of the tax advantage is passed on to companies

which invest in sustainable activities.

Rabo bank allocates at least 70% of the proceeds of Rabo Green

Bonds to provide loans to companies that invest in green projectslike:

y organic farming;

y sustainable construction;

y sustainable innovations such as agrification;

y sustainable energy from wind, water, sun and biomass;

y Projects relating to the forest and nature.

The first project financed with green finance was completed in

December 1995. Since then, the amount of green financing provided

by Rabo bank Group has risen sharply.

Rabo bank accounts for 50% of the total number of green-financed

projects in the Netherlands. At the end of 2008 Rabo bank

contributed in excess of 3.3 billion to green investments.


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FUTURE PROSPECTIVE

Socially responsible investing opportunities suggest that investors

need not compromise their values to make money. If you approach

socially responsible mutual funds like any other investment, you maybe able to put your money into something that both supports your

values and lines your pocketbook.

MISCONCEPTIONS ABOUT GREEN FUNDING

A common misconception is that these investments are donations.

This is not the case. These investments allow investors to give to a

community in need while making a return on their investment. Many

community investments are put toward community development

banks in developing countries or in lower-income areas in the U. S.

for affordable housing and venture capital.

Socially responsible investing opportunities suggest that investors

need not compromise their values to make money. If you approachsocially responsible mutual funds like any other investment, you may

be able to put your money into something that both supports your

values and lines your pocketbook

green funds

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