If a fund manager said he was investing in a UK stock on a multiple of over 750 times the fund might legitimately be described as high risk, particularly if there were a number of other stocks on similarly high valuations in the portfolio. Valuations were not even at this extreme back in the heady days of the technology boom in 1999 and 2000.

But such a valuation is alive and well in the UK market. The company is Climate Exchange Limited – the ticker is CLE LN.

The company market cap is £750m, and the shares were up 11% on the back of President Bush's announcement on 'clean air.' It had sales last year of £880,000 and the only justification for the rating is that it runs a carbon trading exchange. To put the valuation in context many fund managers estimate that an 'expensive' technology stock would be on 10x-12x revenues.

The story doesn't end there. The Chinese company TDK Solar, is on a p/e of 26 times and its recent IPO was oversubscribed ten times.

As one fund manager commented to Investment Week recently: "We think that this is an accident waiting to happen."

He was referring to the plethora of so-called 'green stocks' which seem to be around in the UK equity especially and he quite legitimately raises the issues of whether or not this sector is a bubble which is likely to burst with painful consequences.

Two of the leading SRI fund managers, F&C and Jupiter, have already had greater inflows into their environmental funds so far in 2007 than they had in the whole of 2006.

The climate change debate has attracted a 'new breed' of investors – some of whom invest with their conscience and some of whom believe they do not have to sacrifice their beliefs for a return.

The technology boom of the late 1990s attracted a new breed of investors and their stampede from the market place took the fund management sector five years to recover from. Many of that 'lost generation' of investors are those who switched instead to buy-to-let investing.

The industry needs to be very careful that SRI and environmental investing does not become the next 'bubble' to suck up and spit out another group of inexperienced investors.

It must differentiate between speculative concept stocks or those green 'growth' companies with low revenues and high valuations, and those boring old companies with real revenues and profits profiting from the green trend such as BSkyB, Tesco or M&S.

The climate change debate is a crucial one for the planet but is also an attractive one for investors – let's just hope they don't end up with manure on their bed of roses.

This article first appeared in Investment Week.