Climate change legislation may be up in the air, but a growing number of utility companies worldwide have already hit the ground running with new ways to reduce carbon footprints and meet rising energy demand.

A sizeable focus on renewable energy, smart-grid initiatives, and a presence in markets less encumbered by regulatory uncertainty are the big attractions behind many of the utility investments being held by socially responsible mutual funds.

"Renewable technology is much more nimble and flexible," than large scale technologies like nuclear energy and clean coal, which can take up to ten years to get approval by the U .S. Department of Energy before even being built, says Lily Donge, a senior sustainability analyst who directs environmental research and advocacy for the Bethesda, Md.-based Calvert Group Ltd.

Earlier this year, Calvert conducted an internal benchmarking study of the utilities in the S&P 500 universe, says Donge. Companies were analyzed and ranked by emission costs, management and governance of carbon risk, and opportunities. Three companies that topped the list include NextEra Energy Inc. (until recently known as FPL Group, Inc.), PG&E Corp., and Consolidated Edison Inc.

NextEra Energy, which will change its NYSE ticker symbol from FPL to NEE in late June, runs Florida Power & Light and is the nation's largest generator of wind and solar power. Last month, it raised $190 million in capital for wind projects. "That ability to attract capital when the financing infrastructure is quite thin at this time is remarkable," says Donge. It's held in the Calvert Global Alternative Energy Fund.

Wind projects are getting more cost competitive in relation to natural gas, thanks to greater technology efficiencies, says Donge. And while its just 2% of the energy produced in the U.S., wind energy accounted for more than 40% of the country's additional energy generation in 2008, she notes.

Con Edison, held by the Calvert Social Index Fund, is a power distribution company that's making big investments in smart-grid technology. It's helping design better grids to facilitate more efficient use of energy. It's also installing communication tools which enable commercial and industrial buildings to take power when they need it and give it back to the grid through solar panels, says Donge.

"We absolutely see efficiency and smart-grid programs becoming more main stream. Two years ago, no one knew what smart-grid was. Now the question is how companies can leverage and make money off that," she says.

PG&E Corp. isn't currently in any Calvert fund, but "they are very much leaders in targeting and managing CO2 emissions," says Donge. Its fuel mix, more diversified than that of many other utilities, includes natural gas, renewables and nuclear energy.

Calvert's core funds don't have any nuclear holdings although companies with some nuclear involvement, like NextEra Energy, are permitted in the Calvert Global Alternative Energy Fund as long as they focus on alternative energy. Calvert is doing enhanced engagement with two companies held in its advocacy-oriented Large Cap Value Fund which have nuclear operations, Duke Energy Corp. and Southern Co.

Longer term, Donge expects to see utilities embrace hybrid technologies. For example, customers could receive solar thermal or natural gas power depending on the season or time or day. And even if we don't get global regulation, she expects more bilateral technology arrangements across countries. "There are tons of opportunities in every country," she says.

Abroad, she likes U.K-based Scottish & Southern Energy PLC, a leader in sustainability strategies for 20 years which is very focused on wind and natural gas. It's in Calvert's Global Alternative Energy and World Values International Equity funds.

Renewable energy utilities (wind and geothermal) currently account for about 6% of the $22 million of assets in the Pax World Global Green Fund, with water utilities contributing an additional 6%, says Simon Gottelier, co-portfolio manager and an investment manager for subadvisor Impax Asset Management Group Ltd. in London.

"The renewable energy sector has underperformed the broader market and the wider environmental sector for two years and it's a challenging investment environment, but we do believe there are signs of improvement ahead," says Gottelier.

A top fund holding is Portugal's EDP Renováveis S.A., a major European energy company which acquired Houston-based Horizon Wind Energy from Goldman Sachs in 2007.  It has 3.26 gigawatts of wind capacity installed in the U.S., mostly in the Midwest. It's now focusing on Washington, California, the Northeast and the Great Lakes Region, areas which offer potential growth opportunities since they are still trying to meet state renewable energy requirements, he says.

Although U.S. regulatory uncertainty could slow growth, EDPR has exposure in fast-growing emerging markets Poland and Romania and is also well-positioned in the Brazilian market, says Gottelier.

He also likes fund holding Ormat Technologies Inc., a Reno, Nev.-based manufacturer of equipment used in geothermal power production and an independent provider of this power. Although it faces permitting and financing challenges, it has "very good economics, endless resources from which it can draw power, and is extremely green," says Gottelier. Another plus: global exposure, with operations in Israel, Guatemala, the Philippines, Kenya and Nicaragua.

China Longyuan Power Group Corp., China's No. 1 wind project developer which is listed on the Hong Kong stock exchange, is another fund favorite. New capacity installed in the Chinese wind market, which grew at a 101% compounded rate between 2005 and 2009, is expected to grow 50% this year and 40% in 2011, he says. The key driver: People moving from rural areas to cities in Mainland China need energy. In parallel, the Chinese government is committed to rolling out renewable energy capacity to 15% of China's total energy mix by 2020.

What about the Global Green Fund's water utilities? California Water Service Group could see earnings growth exceed 20% next year should U.S. regulators permit it to increase customer rates to help recoup its big infrastructure investments as expected, says Gottelier. Philippines-based Manila Water has big growth potential too. It has concessions for half of the capital city's water supply, is trying to get the other half, and is looking at developing concessions in India. "It'll enable people in the slums to get water for the first time in their lives," he says.