Green Investing

Invest in Our Future

Green investing today is quite different from usual investing in low-performing traditional stocks. There are a wide range of investment funds. Whether you believe that global warming is a reality or not, the reality is that there are increasing numbers of industries dedicated specifically to finding sources of cleaner energy.

To get an idea of how green investing works, let's start with green energy exchange traded funds (ETFs). Two of the major alternative energy sectors are focused solely on generating solar and wind power. Industries such as these are not only gathering steam as a result of climate change, but many believe that 'peak oil' will be a reality sooner rather than later, making traditional fuels just too expensive.

The wind energy sector has been having a great year. It may be due to the U.S. Department of Energy's goal of obtaining 6% of U.S. electricity from wind by 2020. The First Trust ISE Global Wind Energy ETF (NYSE: FAN), is up 21.77% this year, and Powershares Global Wind Energy Portfolio (NYSE: PWND) is up 36.25% this. Wind energy will provide a growing portion of the US energy supply as the public demands clean energy and the costs of wind technology decrease.

Although solar ETFs are down this year, the sector has potential when you look at the big picture. Solar energy funds like Guggenheim Solar ETF (NYSEArca TAN ) and Market Vectors Solar Energy ETF (NYSEArca: KWT - News ) are down 60% so far this year. Global economies are currently putting solar energy investment on hold, but the technology is becoming more efficient. Solar is a sector to watch in 2012.

The Gabelli SRI Green mutual fund which has made a 20% return over the last 3 years focuses on LED technology, which is dictated both by the government through its mandate that incandescent lights be replaced with light-emitting diodes and the consumer through the use of LEDs in emerging consumer electronics like the LED television. This shift looks set to accelerate over the next two years.

In the U.S., active property investors might want to pay close attention to a renewed interest in Green Real Estate Investment Trusts (REITs). Green REITs encourage the creation of green buildings by moving more capital into the market.

With the recently announced Better Buildings Initiative, President Obama has pledged new tax incentives and financial products to encourage asset portfolio companies to retrofit the existing stock of commercial properties.

If the President's policy efforts begin to work, REITs should be among the first to react. Those REITs taking advantage of new government tax breaks and funds might seize the opportunity to re-brand themselves as best-in-class, high-performance real estate asset portfolios. Obama's 'Better Buildings Initiative' challenged America's commercial building sector to become 20% more energy efficient over the next decade.

With the recent achievements and success of the Durban platform in 2011, it is clear that the financial world will continue to veer towards sustainability and efficiency. As the world embraces green investing, the trend should be on a steady upward curve.