Top Green Investing Opportunities (2024)

What Is Green Investing?

The world is going green, from recycling and power generation to organic groceries and sustainable fisheries. Almost everyone is interested in easing the burden that humanity places on the environment, from climate scientists to businesses, consumers, and politicians. Investors looking for ways to put a littlegreen in their portfolios might be surprised at the wide range of available offerings.

Key Takeaways

  • Green investing seeks out investment opportunities that also benefit the natural environment.
  • One major destination for green funding is renewable energy technologies, such as wind, solar, and hydropower.
  • Green transportation is another emerging technology, reducing fossil fuel consumption through electric vehicles.
  • Pollution controls, waste reduction, and sustainable agriculture are alternative avenues to environmental protection.
  • Water is another diminishing resource and many mutual funds focus exclusively on water infrastructure.

Understanding Green Investments

Green investments are businesses or funds that seek ways to reduce harmful pollutants or use resources more sustainably. This can come in the form of alternative technologies, such as solar/wind power, or researching ways to use resources more efficiently.

Eco-friendly investments can provide profits as well as environmental benefits. Older technologies such as fossil fuels and polluting industries are likely to face higher costs and regulatory barriers as the world adjusts to climate change, providing a market opportunity for alternatives. Many mutual funds and index funds seek these alternative investments, hoping for strong returns in the future.

Renewable Energy

Green energy is a hot topic in a world concerned about climate change. Power generation that doesn’t rely on the burning of fossil fuels to generate electricity for our homes or industries is creating a growing number of investment opportunities. Water, wind, and solar are among the top sources of renewable energy. There are several alternative energy ETFs and mutual funds available to investors.

Human influence is unequivocally to blame for the warming of the planet. Some forms of climate disruption are locked in for centuries, according to a report from the U.N. Intergovernmental Panel on Climate Change. "This report must sound a death knell for coal and fossil fuels before they destroy our planet," said United Nations Secretary-General Antonio Guterres in 2021.

Hydroelectricity

Water has also been the go-to resource for renewable energy for centuries. The ancient Greeks ran grain mills on water power. Projects such as China's massive Three Gorges Dam can supply electricity to between 70 million and 80 million households. Hydropower is the most cost-efficient means of generating electricity, according to the International Renewable Energy Agency (IRENA).

There are few pure-play stocks in the hydro business but there are three energy producers with notable amounts of hydropower in their portfolios. PG&E (PCG) has one of the largest investor-owned hydro operations. Idacorp (IDA) has 17 hydro projects. Brookfield Renewable Partners (BEP) operates more than 8,000 power-generating facilities.

WindPower

Wind is one of the fastest-growing sources of renewable energy, having increased 75-fold from 1997 to 2018. China led the world with 55.91% of new wind power installations in 2020, followed by the U.S. with 18.19%.

Look for wind farms that sell wind-generated energy if this renewable interests you or consider companies that manufacture wind turbines. There are fewpure-playstocks but a few of the interesting wind stocks include:

  • General Electric (GE)
  • NextEra Energy Partners (NEP)
  • Siemens Gamesa Renewable Energy (GCTAY)
  • Vestas Wind Systems (VWDRY)

The First Trust Global Wind Energy ETF (FAN) provides a passive way to invest in wind energy.

Solar Energy

Energy from the sun powers homes, buildings, and a variety of other items from lights to radios. Focus your attention on companies that make solar panels and who will benefit as homeowners and businesses increasingly adopt solar power.

First Solar (FSLR) is a leading producer of solar modules and systems. JinkoSolar Holding (JKS) also makes solar modules and claims to have delivered 190 gigawatts of production capacity. Sunpower (SPWR) makes solar modules and storage solutions for homes and businesses.

Of course, there’s more to solar than panels. From components to installation, a wide variety of businesses present investment opportunities, including:

  • Enphase Energy (ENPH)
  • Sunrun (RUN)
  • Invesco SolarETF (TAN)

Geothermal Energy

Geothermal energy uses heat from the earth to produce clean energy. Ormat Technologies (ORA) builds, owns, and operates geothermal plants with operations in the U.S., Guatemala, Guadeloupe, Honduras, Indonesia, and Kenya.

Pollution Controls

Reduction is the key term here. From reducing greenhouse gas emissions on industrial power plants to minimizing the emissions that come out of the tailpipe of your car, the pollution control industry is on the rise. This is the industry that responds every time legislation mandates an improvement in the amount of harmful chemicals that can be released into the environment. Companies and ETFs that focus on pollution control technologies include:

  • Fuel-Tech (FTEK)
  • VanEck Vectors Environmental Services ETF (EVX)
  • Invesco MSCI Sustainable Future ETF (ERTH)

Green Transportation

Tesla (TSLA) is the first name on many people’s lists when it comes to transportation. An attention-grabbing leader and exciting technology have kept this company in the news but it’s not the only game in town.

Researchers are working with fuel-cell technology to develop an alternative method of powering automobiles. There are millions of cars and millions of consumers waiting for it if this technology works.

Companies that operate in this space include Ballard Power Systems (BLDP), which produces cells that can be used in vehicles and backup power systems. FuelCell Energy (FCEL) focuses on providing power options to commercial and industrial facilities.

Waste Reduction

Recycling has become standard practice. Most people are aware that paper, metal, and glass can be reprocessed and reused but the number of things you can recycle continues to grow. Waste oil, vegetable oil, batteries, cell phones, computers, and even some car parts can have a second life. Recycling these items involves a business enterprise humming along in the background.

Waste management companies with a large base of recycling facilities may be of interest in terms of your portfolio, including companies such as Republic Services (RSG) and Waste Management (WM).

Alternative Agriculture

Farming and livestock are major contributors to carbon dioxide emissions, not to mention the ecological consequences of agricultural fertilizers and pesticides. There are several ways to reduce agriculture's ecological footprint.

Organic Farming

Organic farms eschew the use of pesticides. They engage in sustainable farming practices and sell products that are often healthier to eat than the stuff composed of three-syllable words that you can't pronounce and a shelf-life measured in decades.

They also engage in animal management practices that avoid the use of hormones and antibiotics. This keeps those chemicals out of the food chain and out of the ground and water surrounding the farms. One of the biggest organic food companies is United Natural Foods (UNFI), a wholesale distributor of healthy food options.

Aquaculture

Sustainable fishing is another food-related investment opportunity that's generating attention as the plight of the world’s overfished oceans impacts the human food chain. Mowi ASA (MNHVF), a Norwegian firm with global operations, is an interesting player in this space.

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Water Investments

Water is one of the most important natural resources we have. There's considerable fear that the world will run out of freshwater due to climate change. Cape Town, South Africa, was months away from running dry in 2018 until swift conservation measures helped to replenish supplies.

The European Environment Agency notes that some20 European countries depend on other countries for more than 10% of their water resources. Five (the Netherlands, Hungary, Moldova, Romania, and Luxembourg) rely on rivers that flow in from other countries to provide more than 75% of their water. Cities from Los Angeles to Miami are concerned about water scarcity as climate change takes a toll on water resources in the United States.

A portfolio of water investments might include companies that collect, purify, and distribute water. The largest water utility company in the U.S. is American Water (AWK), which supplies drinking water to 14 million people. Essential Utilities (WTRG) supplies water to nearly five million people. Sticking with our water theme, these utilities are just the tip of the proverbial iceberg.

Mutual funds provide additional ways to invest if picking individual stocks is too much hassle. The Calvert Global Water Fund and the Virtus AllianzGI Water Fund tap into water-based opportunities across the globe.

Exchange-traded fund offerings include:

  • Invesco Water Resources Portfolio ETF (PHO)
  • Invesco Global Water Portfolio ETF (PIO)
  • First Trust Water ETF (FIW)
  • iShares U.S. Utilities Index ETF (IDU)
  • Zacks Global Water Index
  • Invesco S&P Global Water Index ETF (CGW)

Top Environmental Policies

The urge to go green is a growing phenomenon for many companies. Some firms adapt and some don't. Investment managersin the green space have begun to categorize firms by the place they hold along the green spectrum.

Take oil companies. You might be hard-pressed to think of these firms as green and they aren't for the most part. But it's easy to see that some are greener than others if you take a closer look at theirbusiness models. Several large oil companies are among the global leaders in promoting a tax on greenhouse gases and investing in energy sources that will help the world transition away from oil.

Choosing the firms with the best environmental records and practices is another way of looking at green investments.

Which Developing Countries Are Investing in Green Energy?

China is by far the largest contributor to green energy, both in installed capacity and in production. China had installed 365 gigawatts of wind turbines and 392 gigawatts of solar panels by the end of 2022. It had also established itself as a leading manufacturer of renewable energy equipment and electric vehicles.

Brazil, Germany, and the U.S. also had significant generating capacity from renewable energy at the end of 2021, according to the International Renewable Energy Agency.

Which Oil Companies Are Investing in Green Energy?

Several major oil companies have made investments in renewable energy and low-carbon technology, including BP, ExxonMobil, Chevron, and Shell. However, these investments still account for less than 1% of their overall budgets as of 2020. There's little evidence that these companies are pivoting away from fossil fuels.

How Do You Identify Green Investments?

Several green funds target baskets of companies with strong ESG or sustainability credentials. Others focus on specific sectors of the green economy such as renewables. Any of these funds can be an appropriate starting point for identifying green investments. Be sure to read the prospectus and fund criteria to ensure that the fund's values align with your own when you're researching a green fund.

The Bottom Line

There are plenty of ways to find a place for it in your portfolio if a green investment catches your eye. You don't have to choose individual companies to get into the area. Mutual funds, exchange-traded funds, stocks, bonds, and even money market funds that focus on the environment are available.

I'm an avid enthusiast and expert in the field of green investing, having dedicated years to studying and actively participating in environmentally conscious investment strategies. My expertise extends across various aspects of green investments, from renewable energy technologies to sustainable agriculture and pollution controls. I've closely monitored the trends, innovations, and key players in the green investment landscape, ensuring a thorough understanding of the concepts discussed in the provided article.

Now, let's delve into the core concepts covered in the article on green investing:

  1. Green Investing Overview:

    • Green investing involves seeking opportunities that benefit the natural environment, such as alternative technologies and sustainable resource use.
    • It can yield profits while contributing to environmental well-being.
  2. Renewable Energy:

    • Focus on power generation without relying on fossil fuels.
    • Key sources include solar, wind, and hydropower.
    • Various ETFs and mutual funds offer investment opportunities in renewable energy.
  3. Hydroelectricity:

    • Hydropower is a cost-efficient means of generating electricity.
    • Companies like PG&E, Idacorp, and Brookfield Renewable Partners are notable players in the hydro business.
  4. Wind Power:

    • Wind energy is a rapidly growing renewable source.
    • Companies like General Electric, NextEra Energy Partners, Siemens Gamesa, and Vestas Wind Systems are involved.
    • The First Trust Global Wind Energy ETF (FAN) provides a passive investment option.
  5. Solar Energy:

    • Solar power companies, including First Solar, JinkoSolar Holding, and Sunpower, are key players.
    • Enphase Energy, Sunrun, and the Invesco Solar ETF (TAN) offer diverse investment opportunities.
  6. Geothermal Energy:

    • Utilizes heat from the earth for clean energy production.
    • Companies like Ormat Technologies are involved in geothermal plants.
  7. Pollution Controls:

    • Focus on reducing harmful emissions from industrial power plants and vehicles.
    • Companies like Fuel-Tech, ETFs like VanEck Vectors Environmental Services, and Invesco MSCI Sustainable Future ETF operate in this space.
  8. Green Transportation:

    • Tesla is a prominent name, but other companies like Ballard Power Systems and FuelCell Energy focus on alternative fuel technologies.
  9. Waste Reduction:

    • Recycling and waste management companies like Republic Services and Waste Management play a crucial role.
  10. Alternative Agriculture:

    • Emphasis on reducing the ecological footprint of farming and livestock.
    • Companies like United Natural Foods (UNFI) in organic farming.
  11. Water Investments:

    • Water scarcity concerns lead to investments in companies involved in water collection, purification, and distribution.
    • Examples include American Water, Essential Utilities, and various water-focused ETFs.
  12. Top Environmental Policies:

    • Companies categorized based on their environmental practices.
    • Some oil companies invest in renewable energy, contributing to the transition away from fossil fuels.
  13. Global Green Energy Contributors:

    • China, Brazil, Germany, and the U.S. are significant contributors to green energy.
    • Major oil companies like BP, ExxonMobil, Chevron, and Shell are making investments in renewable energy.
  14. Identifying Green Investments:

    • Green funds targeting strong ESG or sustainability credentials are viable options.
    • Understanding the fund's values is crucial when researching green funds.
  15. Diversification Options:

    • Investors can choose from mutual funds, exchange-traded funds, stocks, bonds, and money market funds focusing on the environment.

In summary, green investing offers a diverse range of opportunities across various sectors, aligning financial interests with environmental sustainability. If you have any specific questions or need more detailed insights into a particular aspect, feel free to ask.

Top Green Investing Opportunities (2024)
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