In the absence of any real legislation when it comes to labeling something "green," exchange traded fund (ETF) investors may need to do their own due diligence when it comes to owning the companies that make up those funds.
Currently there are no strict rules regarding which companies or investment instruments are officially "green," and it is up to you to decide which company is green or not. ETF providers do a great job of vetting what they own, but that doesn't leave you off the hook for doing a little homework. [ Clean Energy ETFs Could Get Hit By Cuts. ]
That's because the rules are often open to interpretation.
For example, some investors consider nuclear energy to be green, while others feel that it isn't because of the toxic waste it produces.
Jean Fogler for Investopedia reports that there are also companies that are distributors of alternative energy or manufacturers of parts and equipment needed to produce the energy, such as the photovoltaic cells necessary for creating solar panels, but they are not necessarily "green" themselves. [ Clean Energy ETFs Build Momentum. ]
The debate hasn't necessarily hurt green ETFs, though. TAN) ETF has broken above its 200-day moving average. If China is going to consider price supports for solar energy this year, this could be what TAN needs for good run.
Tisha Guerrero contributed to this article.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.