Be Green, Make Green

Kermit was wrong.

It's easy being green -- if not for frogs, then for investors.

Believe it or not, you can make money off the greening of the earth. Green investing is rarely on the radar screens of many investors, and some would scoff at any link between being green and making green. But whether you want to invest with environmental motives in mind for moral reasons or strictly monetary ones, you can still make money.

Say the words "green investing" and what usually comes to mind are so-called socially responsible investments. Socially responsible investing can refer either to investing in companies that make a certain product -- say, a pollution control device -- or to those that have a strong record in pursuing particular social goals.

Socially responsible mutual funds have exploded in the last few years; there are now 73 such funds, according to Morningstar. While such funds are usually thought of as pursuing liberal goals -- investing in environmentally sound companies, for example, or those that offer same-sex partner benefits -- several are conservative. The Catholic Values Equity fund "does not invest in companies whose products, services and activities violate the core values of the Catholic Church," according to its Web site. Its value has increased 19.14% over the last year, besting the 10% rise in the S&P 500.

Despite their do-gooder tendencies, socially responsible mutual funds have performed pretty well as a category. Overall, they are up 21.56% in the last 12 months, beating the S&P 500, but well below the 55% increase in the Nasdaq. However, within the category, environmentally conscious funds have done very well. The leader over the last year in the socially responsible category is the (GCBLX - Cramer's Take - Stockpickr)Green Century Balanced fund, which focuses on environmental companies. It is up 110.77% for the last 12 months. Second-best is the (WAEGX - Cramer's Take - Stockpickr)Citizens Emerging Growth fund, which is up 108%.

There should be little surprise in these high returns. Many socially responsible funds have been heavy in high-rising, low-polluting technology companies. Thus, Green Century and Citizens Emerging are down 19% and 12%, respectively, the last four weeks following the overall decline in tech shares.

However, even if socially responsible investing is not your bag because it limits diversification, investing in the environment makes sense -- even for the most hardened anti-tree hugger.

"There's a lot of big environmental problems out there," says Dr. Joseph Romm, Executive Director of the Center for Energy and Climate Solutions. "If you can solve them you're going to make a bundle." The center advises companies on how to reduce energy usage and studies those at the cutting edge of environmental technology. He also likes to play the market and loves the long-term potential of companies in the environmental technology field.

Environmental technology is an area of enormous potential over the next 10 or 15 years. Take fuel cells, which are destined to replace gasoline as the energy driving automobiles in the next decade. Romm likes two companies developing the technology: Plug Power (PLUG - Cramer's Take - Stockpickr), which rose from 15 at its IPO to 156 in early March but has since dropped to 62 7/8 and is rated a long-term buy by Merrill Lynch; and Ballard (BLDP - Cramer's Take - Stockpickr), which is trading at 72 after falling from a high of 144 in March. (Fuel cell companies were hot earlier this year because of the high gasoline price crisis.)

But the potential in environmental technology is equally enticing when one looks at emerging markets. "After a certain income threshold, countries start to care more about the environment," says Romm. "We're seeing that already in China and India."

As Romm notes, there are a host of problems to solve, whether major global ones like reducing greenhouse gasses or more mundane ones like recycling car tires (which is actually a huge problem around the world). Romm likes Tirex (TXMC - Cramer's Take - Stockpickr), which has developed a technique to recycle tires. Or take the problem of so-called standby power, which is the electricity that ordinary household appliances use when turned off (think of the clock in your VCR, for example). Turns out that power adds up. Alan Meier, a scientist at Lawrence Berkeley National Laboratory, estimates it accounts for 1% of all greenhouse emissions. One company, Power Integrations (POWI - Cramer's Take - Stockpickr), has developed a technology to reduce this energy usage. Banc of America Securities recently upgraded the company to a strong buy.

Earth Day is Saturday. Whether you spend the day cleaning up a local park, going for a hike, or drinking Budweiser in front of the tube and cursing tree huggers, think about this: You not only can feel good about cleaning the planet, you can make money from it.