As Kermit the frog famously warbled, it's not easy being green--especially when you're a financial advisor whose clients want to add real estate investments to their socially responsible portfolios. Though the array of green real estate-related businesses may be expanding at a rapid clip to include architects, real estate brokers, construction engineers and even mortgage providers, an investor looking for a piece of the action faces an uphill climb.

The problem is a mismatch between supply and demand, with the latter far outstripping the former. According to a 2005 special report on the construction industry by McGraw-Hill, the market for environmentally friendly real estate will be worth as much as $20 billion by 2010. Last summer, a survey released by McGraw-Hill Construction and the National Association of Homebuilders showed those estimates may be too modest: It projected that by 2010 green builders may have captured as much as 10% of the share of new home construction, or an astonishing $38 billion, up from 2% and $7.8 billion today. But while it's getting easier to turn homes green by installing solar panels or bamboo floors, taking the next step and insisting that investment real estate go green is a more arduous process.

"So far, the products available mostly make sense only if your clients are high-net-worth investors," says Benjamin Roberts, a Westport, Conn.-based planner who's establishing his own SRI-based fee-only advisory firm. Even for high-net-worth investors choices are limited to a small selection of private-equity funds; otherwise, they will need to scour the landscape for standalone green building projects.

Speakers who have tackled the topic at the annual SRI in the Rockies conference report being thronged by advisors seeking new investments. "This takes time," says Leanne Tobias, principal of Malachite LLC, a real estate advisory firm in Bethesda, Md. "There are a lot more commercial green properties being built every year, because their fundamentals are so appealing." Before financial firms start developing REITs and funds for the public market, she adds, they want to make sure there is a critical mass of properties available, that the market is mature enough to sustain a public REIT, that current demand won't be a fleeting phenomenon and that the new pools are sufficiently diversified. "For now, most people are trying to get capital from as few institutional players as possible to construct or retrofit the buildings themselves," Tobias explains.

That's good news for those financial planners whose clients do fall into the accredited investor category and can participate in private partnerships. Take, for example, the Rose Smart Growth Investment Equity Fund, a $100 million pool, or the fledgling $150 million urban green real estate fund offered by Revival Fund Management in Boulder, Colo. Typically, this kind of fund requires a minimum investment of $1 million.

"We believe that green buildings can only exist in green locations: downtowns and areas that are convenient to mass transit," says Jonathan Rose, founder of New Yorkbased Jonathan Rose Companies, the private-equity fund's manager. "There is a tremendous opportunity for us to green' those buildings in a fiscally responsible way."

Greening a building can be as simple as tearing up a carpet. That is one of the actions that the Rose team undertook when it acquired a landmark Seattle building as their fund's first purchase. "Underneath this carpet was a beautiful terrazzo floor," Rose rhapsodizes. "That flooring lasts for hundreds of years, just needs soap and water to wash and looks beautiful. Carpet carries mold and dirt, and keeps wearing out." That kind of win-win makes green real estate appealing to investors despite incomplete data on long-term financial returns. "Green spaces are nicer to be in--they have more daylight, more fresh air and fewer toxic chemicals," says Rose. "So tenants are willing to pay more." Moreover, energy costs tend to be lower.

Most of those familiar with the green real estate market believe that soon, products will work their way down to the retail level. As of this writing, there's one: Richard Imperiale's Forward Uniplan Real Estate Fund, offered by Forward Funds of Denver. The fund's minimum investment ranges from $500 to $4,000. But Imperiale's fund isn't strictly green. "We're really more of a progressive real estate fund, which takes into account environmental factors but also looks at broader socially responsible criteria like management policy," he explains. "When every REIT fund is fishing in the same pond, it's great to have a way to distinguish yourself from the crowd."

Many factors that Imperiale evaluates are hard to quantify. Is management open to a dialogue with investors? How does it handle historic or landmark building projects? Does it have a policy on density, traffic issues or sprawl? Since inception in May 1999, the result for investors has been an average annual total return, before the 1.59% management fee, of 16.74% (as of Dec. 31, 2006) compared with 18.8% for the FTSE NAREIT Equity REITs Index, the industry benchmark.

Greg Wendt, a planner with Enright Premier Wealth Advisors in Los Angeles, says his clients are intrigued by green real estate. But for the most part, he advises clients to find ways to reduce the environmental impact of their primary real estate investment--their own homes. "I might advise them on how to make sure they buy a holiday or retirement home that is environmentally friendly," he says. In one case, when Wendt discovered a client was paying $1,000 a month in electricity bills for a house built in the 1970s, he suggested solar panels.

That's the kind of creativity that Leanne Tobias says planners will need to possess while waiting for more green real estate products to make their debut. "It's up to advisors to familiarize themselves with what is going on in their communities and who the green developers are, so that they are aware when one-off investment opportunities arise that might be right for their clients," she says. Tobias also suggests that advisors look farther afield, targeting cities like Pasadena, Calif., the D.C. area or Portland, Ore., where new regulations have given green real estate a big boost. "It's just a matter of time before this is a mainstream investment category," she predicts.

Suzanne McGee frequently contributes to Financial Planning.