Green is the buzzword in corporate Germany

Frankfurt: Renowned for their recycling habits, booming solar and biofuel industry and boasting one of the world's oldest Green parties, Germans are catching on to a global trend in green and socially conscious investing.

Lured by often above-average returns, investors say interest is growing in Europe's biggest economy for funds which invest according to environmental, ethical or social factors such as buying into solar firms or shunning the tobacco industry.

"It is still a niche market [in Germany], but interest is starting to rise," said Christian Zimmermann of Pioneer Investments, one of the largest fund managers in Germany.

Unlike major players such as Britain, Germany makes up just 0.2 per cent of the fast-growing global market in socially responsible investment (SRI), which has expanded by about a third to $3.6 trillion since 2003, according to the European Social Investment Forum.

"Germany's positive green attitude grew in the 1970s and 1980s but no one invested money then with the style that they can do today," said Philipp Spitz, who manages the small environment fund Umwelt Aktiendepot.

The volume of German socially-conscious mutual funds more than doubled to over 1.7 billion euros ($2.23 billion) from 2002 to 2005, the Forum Nachhaltige Geldanlagen, an industry association, said in a recent study.

Investments in German mutual funds overall grew 43 per cent in the same period, the Forum said.

"For investors this is an interesting time as they can do something good for the environment while also benefiting from a sector with high return rates," said Kai Stefani of Allianz Dresdner Global Investors, a German fund manager.

Several German environmental funds which include churches, NGOs and foundations say they offer return rates that match or even beat the performance of classic German equity funds.

Invesco's Umwelt und Nachhaltigkeits Fonds has increased its worth by 15.9 per cent on average annually over the past three years.

The Umwelt Aktiendepot fund, which has invested in renewable energy firms to organic food producers since 1999, says its German fund has had an average annual return rate of around 17 per cent since then.

In 2006, it says its German fund rose in value by about 55 per cent, more than double the performance of the German and European equity markets.

The value of German equity funds investing mainly in firms such as BMW or Siemens rose on average by 6.8 per cent annually over the last five years and 17.7 per cent annually over the last three years, fund industry association BVI said.