ETF Expert

It was 2 years ago when the Chicago Mercantile Exchange began selling hurricane futures contracts. That's right. After Katrina and Rita, hurricane contracts were introduced for insurers to transfer their risk to the capital markets.

What if you're not interested in profiting from the potential danger to Mother Nature. What if… instead… you wish to make some money on "green" initiatives and a reduction in your carbon footprint?

Believe it or not, there's an exchange-traded note for carbon trading. The iPath Global Carbon ETN (GRN) even has a clever ticker symbol.

But what exactly is a good steward of the planet investing in here? GRN tracks the Capital Global Carbon Total Return Index, which measures the performance of the most liquid carbon-related credit plans. Although there's only two main credit plans (European Union Emission and Kyoto Protocol), the index expects to incorporate new carbon-related credit plans as they develop around the world.

The carbon emissions trading system hasn't been without controversy, however. These measures may set limits on carbon dioxide emissions from fossil fuel use, and could ultimately lead to rationing of the use of coal, oil and natural gas. Many blame the plans for driving up the price of old school energy.

From strictly an investment standpoint, GRN hasn't been particularly successful. And the exceptionally low volume shows a lack of interest in carbon trading on the market right now. Moreover, it's down 50% since its inception and it's down 15%+ in 2009.

That said, it has climbed an astonishing 60%+ off of its February lows. it follows that a well-timed move might have made a green investor "greener."

The PowerShares "CleanTech" Fund (PZD) is another way to get Earth Day green. Better yet, it should capitalize on Obama-friendly infrastructure spending.

Unlike the U.S. industrial revolution, the next wave of international growth will be cleaner… more "resource-conscious." And President Obama has continued to push this agenda.

Enter "cleantech" companies that derive the majority of their business from products or services that improve productivity or performance while reducing costs, resource consumption, pollution and toxicity. Expressed another way, these are knowledge-intensive corporations that add economic value (productivity, performance, etc.) while minimizing the use of the world's natural resources.

The companies being tracked by this index fund come from all segments of the economy. This is important to note, because it means the companies will have more reasonable P/E ratios than many of the traditional green ETFs.

The PowerShares "CleanTech" Fund (PZD) is likely to garner greater gains when traditional energy and oil rise in demand.  Notice the momentum of PZD relative to the SPDR Energy Fund (XLE) over the last 3 months. Maybe there is something to the greening of American and beyond?

If you'd like to learn more about ETF investing… then tune into "In the Money With Gary Gordon." You can listen to the show "live" or via podcast or on your iPod.

Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.