IN THE last five years Hongkong's government and business strategies have adapted a greenish hue. But Hongkong unit trusts have been less coloured by environmental concerns. So-called green funds, which gear investment toward companies meeting certain environmental criteria, are almost non-existent in the territory, with only one registered. According to Mr Patrick Meehan of Britain-based financial advisers Holden Meehan, a specialist in green investments, more than 70 ethical or green funds are registered in Europe. But why not Hongkong? Fund managers claim the public does not want them. ''They are not interested in the objective-oriented fund,'' said Mr Edward Lim, manager of marketing at National Mutual in Hongkong. Mr Lim's knowledge stems from National Mutual's Conscience Fund. ''The interest is very, very small, close to zero,'' he said. In fact, National Mutual has opted not to market the fund in Asia at all. ''If we can't sell unit trusts to 98 per cent of the population, we have not got a hope of selling green funds to the remaining two per cent,'' said Mr Stewart Aldcroft, a director at Wardley Investment Services. But green funds are not always conscience driven in their strategy. Some are given the tag of ''ethical'' as they avoid investment into companies which are not deemed ideologically sound. Those companies excluded may be involved in arms, alcohol, animal testing and politically contentious areas. But Pierson's Environmental Growth Fund is an example of a green fund which is not ethically based. The Pierson fund invests in companies, which have shown a commitment to the environment through increased investment in environmental procedures such as waste management, new production technology and new products with an environmentally friendly edge, such as bio-degradable plastic. The strategy behind the fund is that increased spending on environmental procedures will mean increased earnings for the company. Companies such as tobacco firms or paper makers, which may not be deemed ethical by some are still potential areas of investment for the fund as long as they are allocating a certain amount of their expenditure toward environmental procedures. ''At the end of the day, we want to make a reasonable return,'' said Mr Robert Noordhoek Hegt, an adviser on Asian investment at Pierson. ''Investors become interested when they start to see the cost benefits coming through because of the environmental edge.'' But in light of the increased attention the environment has received over the last five years, the paucity of green funds registered in Hongkong still seems surprising. The Government and business appear to have been doing their part. The Government has pledged a 42.8 per cent increase in expenditure for environmental provisions in the latest budget. Similarly, businesses are becoming more vociferous, galvanising forces to join environmental groups and appointing full-time executives, whose sole responsibility is the environment. But relative to some of their European and American counterparts, Asian companies still have some way to go. Many businesses, although vocal on green issues, have yet to meet some of the funds' environmental criteria. Pierson's Environmental Growth Fund, for example, only has 30 per cent of its portfolio based in Asia. ''I find it somewhat tough to find publicly-listed companies in this region to meet our criteria,'' Mr Hegt said. But Pierson's fund, like many green funds, is not registered in Hongkong and so cannot be marketed to the individual investor. Yet in some respects, where the fund is based is irrelevant. Regardless of where the fund is registered, investors can still go into these funds. The restriction for non-Hongkong registered funds concerns the marketing of the fund, not the investment. But aside from lack of marketing, other factors must contribute to the lack of interest in such funds. Is it environmental inertia or lacklustre performance which holds the Hongkong investor back? Some financial analysts would suggest the latter. ''On the whole, their performance doesn't rate that highly,'' said Mr David Chapman, senior portfolio manager at Matheson PFC. National Mutual's recent performance would appear to offer some testimony to this claim. Return on investment amounted to 4.5 per cent over the last five years. However, Mr Meehan maintained many international and British ethical funds had outperformed their conventional competitors in the same sector, resulting in many mainstream clients at least placing a proportion of their money in them. In Britain, he said, the number of funds had grown to more than 30. However, for Hongkong residents, this performance is somewhat less impressive. Set against the Hang Seng index, the sector average for green funds as determined by statisticians Micropal is unimpressive. But set against some of the other indices, such as the S&P 500 (composite), the Salomon World Government Bond or the Financial Times All-Share, last year's results from the better-performing green funds were not bad. In fact, the top three outperformed all three indices. But because the sector is relatively new, it's harder to look at the industry's performance over the longer term. The Friends Provident Stewardship Fund has been around since 1984 and Mr Meehan said it had outperformed many of its conventional counterparts in Britain. But many of the other green funds have been around for less than five years. Kokusai's Global Creation, 21's Century Green Stock, and Clerical Medical's Evergreen all showed a performance improvement of over 16 per cent in the last year. How they fare in the future awaits to be seen.