Ok, maybe I can bring some clarity to that as my company manages some funds that have a “green” label.
Usually, those strategies are referred to as “ESG” for Environmental, Social and Governance oriented. As was mentioned before, everybody has differing opinions on what that should be, so read carefully what you are buying.
Just excluding some stocks based on their industry or business model is probably the easiest “quick and dirty” solution. Other models try to influence businesses or pressure them through voting rights. Or, you buy only firms that “do good” if you like to really feel good about your investments. There is no stringent research if those ESG strategies add or detract from standard stock market returns, you will find studies that confirm one of those outcomes.
If you buy the above mentioned ETFs you can be pretty sure that it is a simple screen that excludes certain industries (alcohol, tobacco, gambling, etc.). Personally, I would not invest the majority of my money in such strategies. The ETFs are too simple and the active strategies are too expensive. However, most asset managers now have to adhere to the PRI (Principles for Responsible Investing) anyway, a lot of institutional clients will not invest with you if you a not a signatory of the UN PRI charter. Also, most clients automatically exclude certain investments, for instance producers of Landmines.
And, if you don’t give a shit there are even ETFs for “sin stocks”, that invest only in companies that make high margins in alcohol, tobacco, sex or firearms:
WSKY - as the name says, “spirited funds” ETF
BJK - gaming ETF
ACT - tobacco, marijuana and alcohol
So, you can choose if you want to embrace the dark side or not…
All the best