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Build a green portfolio and save the planet by eco-investing

Universe of potential investments is quite large and very wide

Eco-investing runs in Christiana Wyly's blood.

When she was a teenager, she says, she persuaded her father to get involved in the launch of Green Mountain Energy, a privately held Texas firm that sells renewable energy to consumers and utilities in five states.

She expects businesses as diverse and unlikely as BP, the British oil giant, and Wal-Mart to become forces in alternative energy, in their roles as either energy producers or users.

One of the nice things about green investing is that the universe of potential investments is large and wide. Green stocks encompass a variety of sectors, company sizes and quality. Many potential investments are young, small and risky.

But you can green up a portfolio with a package of proven blue chips, such as General Electric (symbol GE), Johnson Controls (JCI) and United Technologies (UTX). All three work with developers to cool, heat and light buildings more efficiently, among other things. That's important because buildings are responsible for about one-third of the world's energy consumption.

United Technologies, for example, is a green double play. It has been developing more efficient helicopters and jet engines, as well as such innovative products as gearless elevators that use half the power of traditional lifts.

The industrial conglomerate has also reduced its own energy consumption by 2 percent a year for 10 years and intends to accelerate those savings. Meanwhile, the company has boosted its earnings 14 percent annually since 2002. Its stock price has doubled, and so have its cash dividends.

• Mutual funds and ETFs. For nearly a quarter-century, only one mutual fund, New Alternatives, invested primarily in green stocks. Now, about a half-dozen do — Guinness Atkinson Alternative Energy, Calvert Global Alternative Energy, PowerShares WilderHill Clean Energy Portfolio and Market Vectors Global Alternative ETF, among others — and more are on the way. That will almost certainly create additional demand for green stocks.

Light Green Advisors, a Seattle firm that manages green-screened money, has created several eco-indexes, among them one that includes so-called light-green stocks.

LGA's president, Jon Naimon, says the index doesn't rule out any industries but rather seeks to include companies with strong environmental records. Those kinds of stocks, Naimon contends, deserve a "green premium."

Claymore/LGA Green ETF (GRN), an ETF that launched last December, tracks the Light Green Eco Index and will put Naimon's research to the test. The fund has gained 1 percent this year, compared with 3 percent for Standard & Poor's 500-stock index.


Jeffrey R. Kosnett is a senior editor at Kiplinger's Personal Finance magazine. Send your questions and comments to moneypower@kiplinger.com.