With more such products to hit the market soon, fund managers claim the potential to invest in green companies is immense and returns are also expected to be healthy.

“The returns are likely to be immense,” said Vivek Tandon, general partner at Aloe Private Equity. “For instance, we invested in Hyderabad-based Greenko group, that owns and operates renewable energy projects like biomass plants and hydropower projects. The value of this company has grown almost seven times since we invested in 2006 through our first environment fund.”

ABN Amro’s sustainable development fund manager Amit Nigam voices a similar opinion. “Our fund has generated returns of 60 per cent since its launch in May. We work on the principle that over a long term of three to six years, these companies outperform the index, as they are less likely to be impacted by regulatory changes in the environment space. In fact, in Brazil and in Europe, such funds have been outperforming indices consistently,” he said. Since its launch in 2001, The Brazil Ethical Fund has given a return of almost 330 per cent, compared to the 253 per cent return that the benchmark national index of Brazil’s Bovespa has generated.

Interestingly, contrary to popular perception that small retail investors would be unlikely to park their money into such funds, Nigam claimed that almost 98 per cent of investors to the fund are from the retail category and contribute roughly 60 per cent of the assets under management. This is a strong indication of growing consumer interest in supporting green development.