Greenbackers.

Investors see plenty of profits in eco-friendly start-ups.

ONE MINUTE, GREEN INVESTOR JOHN FORGACH WAS WATCHING Argentine businessmen pitch their plan to rear guanacos, Ilama-like Andean animals whose coats, they claim, make cashmere feel like nylon. Minutes later, he was setting up a meeting. The world of environmentally friendly investing is no love-in for tree huggers and hippies. It's a money grab.

"I am going to Argentina next week," Forgach said a few moments later, attending a Rio de Janeiro venture capital contest for green start-ups on behalf of his eco-fund, Sao Paulo-based A2R Fundos Ambientais. "Someone will go down in a few weeks to kick the tires as it were and then we work. They want US$1 million or $2 million and, if everything goes well, we could invest within three months. You have to be fast."

Just a few years ago, Forgach was in no hurry to invest in environmentally friendly schemes like the guanaco deal. Not only were such projects few and far between, but Forgach could afford to wait because he was the only fund manager putting money into them. Now, consumer demand for certifiable and non-harmful products has shot up, so competition is fierce.

The Washington, D.C.-based World Resources Institute found that out when it launched the first New Ventures contest in 1999. Asking that all entrants be "socially responsible, environmentally beneficial and highly profitable," the institute expected a few dozen entries. Then ideas started pouring in from across the continent from Mexico to Argentina. By show time, more than 200 entrepreneurs and businesses had entered the contest, including an Amazonian cosmetics firm, an Ecuadoran online Spanish translation service and a U.S.Brazilian partnership to produce hemp clothing.

"This far exceeded our expectations," says Matthew Arnold, senior vice president and chief operating officer of World Resources. "At least five other people representing five other governments have asked us to do this in their countries. It is a sign that something is going right."

Latin American entrepreneurs and governments aren't alone; perhaps more significantly investors, too, are scouring the region for green, money-making projects. The Environmental Enterprises Assistance Fund, E&Co, the Multilateral Investment Fund and other Brazilian organizations are all channeling funds into eco-ventures.

"There are a lot of gringos coming and investing," says Adam de Sola Pool, chief investment officer at Environmental Investment Partners, a 22 million euro [$19 million] fund focused on Eastern European start-ups. "I guess there is $1 billion in venture capital floating around. In Western Europe, maybe you'd get 150 million euros [$128 million]."

Money-makers. Fund managers are keen to point out that they are in this for the money, not just to do a good turn. Returns may not always be as astronomical or as quick as with traditional investments, they say, but the satisfaction of investing in something worthwhile compensates for a lost percentage point or two. It's called the triple bottom line: profitability, social benefit and environmental reward.

"We're not saying 'Don't make a profit:" says Tammy E. Newmark, manager of the EcoEnterprises Fund, the investment division of The Nature Conservancy. Get rich! But if you make 46% instead of 44%, is it worth it, in the long term, for 2%?"

Newmark says big companies, too, are increasingly prepared to forego a sliver of profits to do the right thing. Stores selling exclusively eco-friendly products have forced traditional supermarkets to start up their own green lines, she notes. The Home Depot says that by 2005 it will sell only certified timber products. After speaking at the New Ventures conference, Forgach was approached by a representative of Nabisco seeking his advice on how to ensure the food company's gelatin products are clean and environmentally friendly.

Nabisco says commercial pressures are such that it must now make certain all its products are certifiable. The Internet has made corporate practices transparent, Forgach says; one slip and a worldwide boycott can be launched in a few hours.

The new world is fiercely competitive, so much so that the Argentine company that captured Forgach was not among the winners of the New Ventures contest. That does not bother the Sao Paulo-based businessman. "I am here to make money and their basic ingredients are good," says Forgach. "I even have my exits. In a few years we'll sell it to a big bank or the owners might even buy us out. We're going to make a lot of money."