Watch the markets for tipoffs to clean tech's future

Now that the stock exchanges have rebounded from the recession of the last two years, so have the outlook for companies that are at the technological forefront of green technology and clean tech.

To track the performance of publicly traded clean-energy stocks, the NASDAQ has three indexes that benchmark the sector:

• CELS that tracks U.S. listed clean-energy companies;
• QWND that tracks global wind power companies;
• QGRD that looks at smart grid and grid infrastructure companies.

From 2007 through 2009, all three indexes grew at phenomenal rates, outperforming most market indicators. And you can expect the clean-energy indexes to continue to be volatile but likely to outperform the general market during stock market ups and downs.

Clean-energy technologies are becoming cheaper and more prevalent. It will still be some years before there are everyday applications for some technologies, like Bloom Energy’s “Boom Box,” which I blogged about last month. Future development is being propelled by funding by venture capitalists and major multinational firms, such as Dow Chemical, Panasonic and GE, investing billions in green technology.

You can expect to see over the next 5-10 years the same phenomenon (Moore’s Law) that affected microchip technology over the last 20 years to have the same impact on clean tech: manufacturing advances in technology creation that drive down prices, increases manufacturing efficiencies and price declines in raw materials.

We have already seen some advances in everyday use of green technology with washing machines embedded with smart devices that can communicate with smart meters and the grid, roof tiles integrated with solar photovoltaic and the evolution of biomass power generation.

Now, if you look to invest in mutual funds instead of the indexes, there are plenty of funds that invest in green technology. These might be more palatable to most investors because they are less volatile and more suited for long-term investments. They are socially responsible funds that invest in the stocks of companies that are environmentally proactive, and which are developing green technology.

Three mutual funds to examine, but these are in no way investment recommendations:

• New Alternatives Fund. NALFX claims to be the first environmental mutual fund, began in September 1982, and the “greenest fund” in the U.S. The fund seeks socially responsible firms and selects companies in alternative energy, recycling, clean air and water, pollution prevention and conservation.

• Portfolio 21. PORTX invests in companies that are integrating intelligent and forward-thinking environmental strategies into their overall business planning. The portfolio includes companies using financial and proprietary environmental analysis to identify those best equipped to manage the ecological risks. Some companies among the holdings: Google, Staples, Novartis, Roche, Telefonica.

• Winslow Green Growth. WGGFX is a global growth equity fund that intends to invest a significant portion of its assets in small and medium cap companies. The fund focuses on certain environmentally-oriented investment themes, such as clean energy, water management, sustainable living, environmental services, green transportation and green building products.

Lastly, keep this in mind: Only invest in stocks, funds and companies that you have researched and understand.