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Green investment is booming. Market experts say that water shortages, waste issues and the symptoms of climate change will provide plenty of opportunity for investors to make money out of companies investing in wind, hydroelectric, geothermal and solar energy.

Certainly, the evidence suggests there has been massive growth in this area.

According to the Responsible Investment Association Australasia's 2007 'Benchmarking Survey', responsible investment in the areas of ethical managed funds, community finance, green loans and charity portfolios grew 43 per cent in 2006 to 2007.

In the three years from 2004 to 2007, managed responsible investment portfolios alone grew by 380 per cent.

The focus on environmental issue has driven much of this growth.

But how do you get into green shares? Or develop a green portfolio? And if it means doing your homework on companies, how exactly do you go about it?

As an aspiring green investor you can choose from one of two methods. The first is the do it yourself (DIY) approach. The second is the 'Yellow Pages approach': call in a financial advisor for all your needs.

Doing your homework

For anyone taking the DIY approach, the most important thing is research.

This means combing through company documents such as annual reports and letters to shareholders; usually these can be found on the company website.

Alternatively, you can go to bodies such as the United Nations Principles for Responsible Investment website or to the websites of individual fund managers.

Fund managers split their investments into classes, including those that qualify as environmental, social and governance (ESG) type of investments. All fund managers have a range of ethically responsible funds that investors can select.

To find out which companies are green, go the Dow Jones Sustainability Index and the Australian SAM Sustainability Index.

Making your choice

The Yellow Pages approach means calling a stockbroker or better still, a financial planner, who will consider all your investment needs.

They'll also look at where green investing sits in your total investment concerns and cater to your needs, whether you want part of your portfolio dedicated to green investing, or the whole enchilada.

Scott Walters, financial advice leader of Mercer Wealth Solutions, says DIY investors have no shortage of access to information.

"There is a wealth of material online and offline for the DIY investor,'' he says.

To buy and sell shares, you can use a stockbroker, although it's possible to do it online yourself.

Walters says the DIY investors can also choose between two ways to invest. One is through direct shares, and the other is to go through managed funds. Alternatively, you can cover your bases and do both.

The biggest growth areas for green investment are anything related to energy, Walters says. This ranges from geothermal companies, to businesses specialising in solar cell technology, to those that specialise in underground coal gasification.

But what about the performance of green investments?

In the first year of its launch, the value of the Australian SAM Sustainability Index rose over 20 per cent. This pipped the index of ordinary stocks, the S&P/ASX 200, by 0.7 per cent.

A small difference, perhaps, but at least being ethical won't leave you out of pocket. And as Walters says: "This is as much a conscience issue as it is a commercial issue."