FUND WATCH


Portfolio 21: A World of Green

This global fund invests nearly two-thirds of assets in overseas companies it deems environmentally friendly.



Green goes global in Portfolio 21, a fund that hunts around the world for companies that design ecologically sound products, use renewable energy and develop efficient production methods. Headquartered in Portland, Portfolio 21 (symbol PORTX) is one of a small but growing breed of funds that buy companies poised to prosper in an era of climate change, conservation and government incentives for renewable fuels.

Nearly two-thirds of the $220-million fund is invested overseas, mostly in Europe. Portfolio 21's design didn't include originally include investing in foreign companies. But there weren't enough U.S. firms that filled the bill for the fund to be properly diversified, says Carsten Henningsen, founder of the fund's parent firm, Progressive Investment Management.

To make it into the fund, companies must meet six criteria, which include the environmental impact of their products, the packaging and energy efficiency of their products and the impact on local communities. From a universe of about 2,000 publicly traded companies, Portfolio 21 chooses about 90. Most of those are industry giants or large companies, although about a quarter of the fund is invested in small- or medium-size outfits. Holdings range from well-known names such as IBM (IBM), Staples (SPLS) and Nokia (NOK) to lesser-known companies like solar-cell maker Suntech Power (STP) and Shimano, a Japanese company that makes bicycle parts.

Many stocks in Portfolio 21 aren't what investors typically think of as "green" companies. Henningsen likes German engineering and electronics company Siemens (SI) because it invests in wind turbine production and also makes high-efficiency lighting and mass-transit equipment. Another recent holding, Sharp Electronics, may be known for its LCD televisions, but it's also the world's largest producer of solar cells.

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Pure plays on alternative energy make up a small slice of the fund. They're riskier, and they use "technology that still needs to be improved upon" before they take off, says Henningsen. One recent favorite is Zoltek (ZOLT), a St. Louis company that makes a component used in wind turbine blades.

Over the past five years (the fund began in 1999) through May 2, Portfolio 21 has returned an annualized 14%, one percentage point more than its benchmark, the MSCI World Equity index. The fund, which has a $5,000 minimum investment, charges 1.50% in annual fees.




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