You want a car that gets good gas mileage and you want energy efficient appliances (or at least I hope you do). But do you want a low-carbon investment portfolio?

The Green Century Balanced Fund is betting that you do. The Boston-based mutual fund says it is the first U.S.-based fund to disclose its carbon footprint, which is 66% less than the carbon intensity of the S&P 500 Index.

Let’s be clear what we’re talking about here. This isn’t an accounting of how much energy the mutual fund company uses in its offices or how often its staffers get on planes. It’s an analysis of the tons of carbon emissions per million dollars of revenue that are generated by the companies held by the Balanced Fund, compared to the firms in the S&P 500.

Why would you care? Not merely because you want to invest in mutual funds and companies that are greener and cleaner than average (although, again, I hope you do) but because those funds and companies will over time outperform their peers -- an arguable but much iffier proposition.

In a prepared statement, Simon Thomas, the chief of executive of Trucost, a firm that did the analysis for Green Century, said:

"There will clearly be winners and losers from climate change regulation, with companies that are less carbon intensive than their sector peers standing to gain competitive advantage."

While, as they say, past performance is no guide to future returns, the tiny ($47 million in assets under management) Green Century Balanced Fund has, in fact, outperformed the S&P 500 Index over the last decade:

"The Green Century Balanced Fund’s returns for the one-, three-, five-, and ten-year periods ended June 30, 2009 were -13.36%, -3.78%, -1.05%, and 4.64%, respectively.  The S&P 500® Index returns for the one-, three-, five-, and ten-year periods ended June 30, 2009 were -26.21%, -8.22%, -2.24% and -2.22%, respectively."

Of course, this is partly due the fact that Green Century is a “balanced” fund -- as of March 31, it held more than 40% of its assets in cash and bonds -- and stocks have underformed cash and bonds lately, to say the least.

Still, there’s a big idea here -- that mutual funds, and not just companies, should be required to disclose the carbon footprints of their holdings. To learn more about that, I called up Cary Krosinsky, a vice president of Trucost, which is based in the U.K. I’ve been meaning for some time to reach out to privately-held Trucost because one of its big investors is Robert A.G. Monks, the estimable shareholder advocate who I profiled in FORTUNE (“Investors of the World, Unite!“) back in 2002.

Krosinsky told me that Trucost published two relevant studies on the topic this year -- one on the carbon intensity of U.S. mutual funds in April, another on the carbon intensity of the S&P500 in June. The nonprofit Investor Responsibility Research Center (IRRC) commission the S&P 500 study, which found not just vast differences in the carbon intensity of companies across sectors (which you would expect) but also major differences within sectors (which you might not.)

If, as now seems likely, Congress passes a cap-and-trade program to regulate carbon emissions and put a price on fossil fuel emissions, the impact on companies would vary widely. Assuming a market price of about $28 per ton of carbon-equivalent emissions, the study says:

"Exposure to carbon costs varies significantly across companies in the Index. Carbon costs would amount to less than 1% of EBITDA for 203 companies, while 71 companies could see earnings fall by 10% or more."

And:

"Financial risk from carbon costs is greatest in the Utilities sector, where EBITDA at a company level could fall by 2% to 117%."

As for mutual funds, they, too, vary widely in terms of their carbon exposure -- sometimes in unexpected ways. Trucost’s report, called Carbon Counts USA, examined the carbon performance of 91 mutual funds in the U.S., including 16 funds that say they focus on sustainability or socially responsible investing. It did not make all the results public, but it said “the footprint of the most carbon-intensive fund is over 38 times larger than the lowest-carbon fund, reflecting the range in potential carbon risk.”

As you’d expect, the 16 funds that focus on sustainability or social investing have, as a group, the smallest carbon footprint, but some are much “greener” than others. Trucost found that the Sentinel Sustainable Core Opportunities Fund has a carbon intensity (692 tons of carbon equivalent emissions per $1 million of revenues of the fund’s holdingss) that is seven times as great as the Ariel Appreciation Fund, which has the smallest footprint (98 tons of carbon equivalent emissions per $1 million in revenues.)

Green Century, meanwhile, reports that its footprint is 126 tons of carbon per $1 million in revenues, bigger than the Ariel Fund but just a bit more than half of the average of the sustainability funds tracked by Trucost. The 10 biggest holdings of the Green Century Balanced Fund, as of March 31, were IBM, AT&T, Xerox, Federal Home Loan Bank of Chicago, General Mills, SLM Corp., Telfonica SA, Johnson & Johnson, Advance Auto Parts and Oracle.

Gustav Knepper Power Station in Dortmund, Germany

What does this all mean? It’s too soon to say. Only over time will we be able to see whether low carbon stocks and funds, as a group, outperform those with higher carbon exposure. Already, though, some investors are factoring carbon into their long-term view. Trucost is using its data to develop investable indexes of low-carbon companies. “If enough investors look at carbon intensity,” Krosinsky tells me, “it will create a competitive dynamic and encourage companies to become more efficient.” More capital would then flow to clean tech, and less to coal plants like the one to the left.

_{Market Board — Image by ngould.
Coal Plant — Image CC licensed by Arnoldius.}