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I am looking for publicly traded companies that are in line with this new environmentally friendly ("green") era. How do I research these companies? -- C.D.

Go green!:

We hear it almost everyday now. Our cars, our homes, even our diets are being transformed into environmentally friendly and health conscious versions of their former selves, but what about

your

portfolio?

What Does "Going Green" Really Mean?

When we hear the word green, the idea of environmental crusaders might immediately spring to mind. But green (or, socially responsible) investing encompasses so much more than that. Socially responsible investing (SRI) is just what the name suggests: investing in

public companies whose goals and primary business practices work toward the benefit of society. More specifically, it can mean investing in a company partly because you would like to see their nonfinancial agenda furthered. SRI can be environmentally motivated, but it can also be spurred by religion, lifestyle and political affiliations.

Pretty much any ideological argument can be turned into an opportunity for investing in a socially responsible company.

Green for the Planet and Your Wallet

Saving the rainforest (for example) is only part of the equation. Believe it or not, you can help the world while making money, too.

There are many reasons why socially-minded

stocks perform, including like-minded customers who want their favorite company to succeed and innovative products that thrive under nontraditional leadership. Regardless, seeing growth in the "trees" as well as your portfolio doesn't have to be a rare phenomenon. Socially responsible investments do make money. However, like any other investment, there are champs and there are losers. Pick the right one and you can really cash out -- many of the best performing green stocks and

funds beat the market every year (

"Best, Worst Socially Responsible Funds").

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Where to Look for Green Investments

Where you turn can be a big factor in both the

returns you get and the impact your company makes. That's because investing in green companies adds a whole new element to the investing game. Not only do you have to analyze the stock market side, but you also have to take a look at the company's business practices to determine whether or not they will match your interests. As an investor, you'll have the option of choosing individual stocks or investing in socially responsible

indices and funds.

Individual stocks provide you with a good deal more flexibility than a

managed fund or predetermined index (see

index fund). Conversely, individual stock-picking requires a good deal more homework. And, if your cause is more obscure, then developing

your own

socially responsible portfolio might be a lot more effective than buying into something that already exists but doesn't address all of the issues that you're passionate about.

Socially responsible index and mutual funds (including

ETFs) are becoming more and more popular. If you're thinking about investing in a socially responsible fund, there are resources online that can provide you with a competitive overview of the funds that are available to you. One of the best places to check out online is

SocialFunds.com

. The site provides investors with detailed information on virtually every major socially responsible fund out there, including its performance data and the social issues the fund addresses.

Are Some Green Companies Just Blowing Smoke?

Addressing social issues has become the fashion these days, even for huge multinational companies (

"Wal-Mart, Home Depot Go Green"). Public relations firms shoot out press releases left and right touting the environmentally-minded products and initiatives their clients are launching on an almost daily basis. Just because a company is talking to the media about their emerging social awareness doesn't make the company a suitable socially responsible investment. Researching the impact that a company's green policies have on their business as a whole is the best way to tell if they're the real "green" deal.

What About "Sin" Stocks?

On the opposite end of the spectrum from green investing are the sin stocks (

"Cramer's 'Mad Money' Recap: Sin Stocks"). Sin stocks are companies whose products aren't something you'd enjoy on your church picnic. Gambling, tobacco and alcohol companies are all examples of sin stocks. If your moral fabric isn't too badly torn by the idea of investing in these types of companies, think about this: Sin stocks usually boast huge

margins and a customer base full of disposable income. If going green isn't your cup of tea, sin stocks can be one "hell" of an investment.

Weighing the Alternatives

Socially responsible investing is basically a balancing act: Do you select companies primarily on their good deeds or do you focus more on companies that will provide a big return? Remember, the two aren't necessarily mutually exclusive, and you should personalize your ethical portfolio to suit your needs as both an investor and as a human being.

The Toyota Prius might not have as much legroom as your Hummer, but by taking a look at green investing, you can help make a positive contribution to society

and

make money at the same time.

To learn more about green and socially responsible investing, check out these videos on TheStreet.com TV:

  • Screening for 'Green' Stocks
  • Money and Morals
  • A Banking Advocate
  • BearingPoint Pounds the Pavement
  • Timberland's Green Goals
  • An Environmentally Friendly Mutual Fund
  • Big Blue Boasts Green Initiatives
  • Wall St. Confidential: Cramer Says Solar Stocks Overheated

Jonas Elmerraji is the founder and publisher of Growfolio.com, an online business magazine for young investors.