4 Environmentally Conscious Investment Options

Quick Answer

Green investing options include these types of environmentally conscious companies:

  1. Renewable energy
  2. Clean water
  3. Green transportation
  4. Ocean conservation
Community garden with gardeners

Lots of investors are looking to do more than just make money. Worldwide, more than a quarter say that ESG investing is central to their investment approach, according to a 2022 Capital Group study. With this strategy, investors look to environmental, social and corporate governance factors to guide their investment choices.

ESG investing can be appealing to folks who'd like to generate returns in more environmentally conscious ways. The idea is to invest in eco-friendly companies or industries that are committed to protecting the earth. The following investment options might be a good jumping-off point.

Different Ways to Invest in Sustainability

Before we get into specific investments, let's quickly discuss the nuts and bolts of ESG investing. You might choose to lead with specific causes you're passionate about. If you're not sure where to start, you can research industries that are working to advance environmental causes, such as combating climate change. From there, you can select investment vehicles that allow you to invest in those industries or companies. That can include:

  • ESG funds: This includes ESG exchange-traded funds (ETFs) and mutual funds. They have some key differences, but both comprise socially responsible companies. Investors can buy bundles of different securities like stocks and bonds. ESG funds can help diversify your investment portfolio and allow you to invest in environmentally conscious companies.
  • Eco-friendly retirement accounts: Some 401(k)s offer a brokerage window. This self-directed option may let you add in eco-friendly investments. You can also use an individual retirement account (IRA) to invest in ESG stocks, mutual funds, index funds and ETFs.
  • Individual stocks: Investors can buy shares of stock from companies that meet their environmental standards. It's worth noting that individual stocks are considered high-risk investments. As such, you'll want to do your research, like learning different ways to analyze stocks and performance metrics. Your risk tolerance will likely come into play as well. It may be best to start small when investing in individual stocks.
  • Private equity: Another option is to provide funding to environmentally friendly startups. That may be through angel investing, crowdfunding platforms or venture capital firms. Investors typically receive equity in exchange for capital. Just bear in mind that this is considered a riskier type of investment since it's never guaranteed that a company will take off. Evaluating the company's business plan, revenue history and projections can help you make an informed decision.
Invest Your Money Smarter

Browse Top Brokerages

Environmentally Conscious Investment Options

Renewable Energy

Renewable energy can be used for electricity, transportation, heating and more. It relies on natural resources—such as the sun, wind or geothermal resources—instead of fossil fuels. That's better for the environment and provides a source of energy that naturally replenishes itself. There are multiple ways to invest in clean energy. One is to install a renewable energy system in your home. That can include:

  • Solar panels for electricity
  • Solar water heaters
  • Small wind electric systems
  • Geothermal heat pumps

Some energy-efficient investments may qualify you for federal tax credits or incentives at the state level. Beyond that, you can also invest in companies that make essential parts or technology that power renewable energy. Over the past decade, the iShares Global Clean Energy ETF has had an average annual return of more than 12%.

Clean Water

For at least one month each year, nearly two-thirds of the world's population experiences severe water scarcity, according to UNICEF. That works out to 4 billion people. Your investment portfolio can make a positive impact.

You can zero in on companies that are focused on ending the global water crisis. That may be through clean-water technology, infrastructure solutions or innovative water treatment approaches. If you'd rather not invest in individual stocks, look for funds within this space. Fidelity, for example, offers a water sustainability fund that invests in companies that are working toward a solution.

Green Transportation

Unlike cars that rely on gasoline, electric vehicles don't produce tailpipe emissions. Transitioning to electric vehicles could eliminate over 800 million tons of carbon dioxide emissions every year by 2040, according to the Environmental Defense Fund.

An obvious way to invest in green transportation is to opt for an electric vehicle over a car that runs on gasoline. There's an upfront cost, but a $7,500 tax credit may help offset that expense. You can also invest in companies that:

  • Manufacture electric vehicles
  • Create technology to improve the industry
  • Make critical parts or equipment for green transportation
  • Support the transition to green transportation

You can also buy into a fund that invests in such companies. The CLNR IQ Cleaner Transport ETF, offered by New York Life, is up more than 12% in 2023 as of this writing.

Ocean Conservation

The world's oceans continue to be negatively affected by human behavior. More than 800 wildlife species have been harmed by plastic pollution, according to the Pew Charitable Trusts. Certain pollutants can also affect human health. Plastic waste, chemicals, agricultural runoff and other toxins are largely to blame. Sustainable ocean investing can take many forms. That may include investing in:

  • Companies that are committed to sea life conservation
  • Businesses that are working to reduce or eliminate ocean pollutants
  • Companies that are focused on eco-friendly technologies like aquaculture

There are also investment funds designed with the ocean in mind. The Ocean Health Investment Portfolio, offered through Newday, is one example. It invests in companies that prioritize things like ocean protection and ending lifecycle product waste.

The Bottom Line

It's possible to use your investment portfolio to help protect the environment. It's about investing in eco-friendly companies that share your values, whether that's through individual stocks or investment funds. If all goes well, you'll net returns in the process.

You can also help care for the environment through charitable giving. The stronger your financial health, the better positioned you'll be to do that. Maintaining healthy credit is part of the journey. Free credit monitoring with Experian makes it easy to keep track of what's on your credit report (and keep an eye out for suspicious activity).