We recently published a list of 10 Best Environmental Stocks to Buy. In this article, we are going to take a look at where Johnson Controls International PLC (NYSE:JCI) stands against other best environmental stocks to buy.
Environmental stocks have gained attention in recent times with more investors being interested in stock stability and increased regulatory focus for climate change issues and the financial markets. They are often favored for their potential to tap into environmental opportunities, as consumers, regulators, and companies seeking to meet Net-Zero targets increasingly look for new and innovative solutions to combat climate change and overcome environmental challenges.
Fund managers looking to meet their transition strategies are heavily shifting towards low-carbon solutions and projects. Potential growth projects include renewable energy projects, nuclear energy restarts and renewals, solar, battery storage projects, carbon capture and storage, and new natural gas capacity among others. The US SIF Trends Report 2024/2025 identified that 73% of surveyed investors expect the sustainable investment market to be on the rise in the next 2 years, driven by client demand, regulatory requirements, and advances in data analytics. The fund landscape is fast changing with transition investing becoming the major focus for investors, even with the potential uncertainties due to the Trump administration’s proposal to revoke EV tax credits, driven by new technologies in the sector and decreases in costs. The outlook for renewable energy is still positive. A PwC report finds that ESG-focused institutional investment will rise 84% to $33.9 trillion in 2026, comprising over 21.5% of assets under management. Environmental stocks have experienced fluctuating performance, influenced by market dynamics and investor sentiment in recent years. In 2022, U.S. ESG funds net inflows decreased significantly from $69.2 billion in 2021 to $3.1 billion, the lowest level in seven years. 2023 followed a similar trend, with ESG funds in the U.S. experiencing net outflows exceeding $5 billion in the final quarter, the most substantial quarterly withdrawal in over five years. Poor investment performance and increased political scrutiny were driving forces for the slowdown. Even with the market challenges and fluctuations, certain companies within the environmental sector have demonstrated strong resilience. In summary, while investor opinions of stronger environmental stocks performance over traditional stocks remain debatable, select firms continue to stand resilient in the ever-evolving ESG landscape.
What Are Environmental Stocks?
Several funds are focused on industry stocks for companies that provide products and services in climate solutions or green investments that work towards reducing harmful pollutants or sustainable resource use. This can either be in the area of alternative technologies, e.g. solar/wind power, or other areas of environmental solutions such as waste management. As industries that rely heavily on fossil fuels and create pollution are facing higher costs, fines, and regulatory scrutiny, the market opportunity for alternatives is on the rise. Several mutual funds and index funds are looking at these alternative investments that provide a strong potential for future returns.
The Green Economy Index Family tracks the sectors focusing on the enhancement of economic development based on the reduction of carbon usage. These sectors include energy efficiency, bio/clean fuels, and pollution mitigation. Environmental stocks form a key part of sustainable investing, and therefore, by prioritizing environmental concerns, investors can contribute to long-term sustainability and reduce the negative costs of climate change.
However, with growing fund manager attention and the potential of gains through policy benefits, the risk of greenwashing and misleading claims by companies is also becoming a significant challenge. This has led financial watchdogs to increase scrutiny and seller responsibility in several geographies that specify accurate ‘labels’ for levels of environmental and green funds. With the US Securities and Exchange Commission (SEC) ESG Disclosure Rule, stricter and more enforceable ESG regulations and disclosure requirements are on the horizon for the US markets.
Our Methodology
To come up with the best environmental stocks to buy list, we have considered all US environmental stocks that feature on different indexes and have upscale potential. To identify stocks from the environmental sector we have used the FTSE Green Revenues Classification System, to come up with the sectors that are working in the provision of green solutions, these included companies involved in alternative energy generation, water and wastewater treatments, transport solutions, and pollution control. We then used Insider Monkey’s Hedge Fund Q3 2024 database to rank 10 stocks based on the number of hedge fund holders. Our list is sorted in ascending order according to hedge fund sentiment.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A team of workers wearing white hardhani and safety goggles assembling a complex HVAC system.
Johnson Controls International plc (NYSE:JCI)
Number of Hedge Fund Holders: 52
Johnson Controls International PLC (NYSE:JCI) is considered one of the best environmental stocks to buy due to its strong focus on creating energy-efficient buildings and HVAC systems. The company creates environmental benefits through SMART buildings, HVAC equipment, including air handling and distribution and building automation systems, and HVAC control systems.
The cooling systems company has majorly benefitted from investment crank-ups in data centers with the artificial intelligence push nudging the demand for data center cooling requirement in recent times. Over the past year, data center revenue for Johnson Controls International PLC (NYSE:JCI) is said to have doubled, which suggests a continuing rise in infrastructure building by data center owners and AI giants. There had been growing market concerns previously with the release of the Chinese AI app DeepSeek, creating cost concerns for existing players, as the cutting-edge app is said to have been built at a fraction of the cost of its predecessors. With Google announcing that it will be spending $75 million for capital building in 2025, investors are starting to realize that AI giants are still looking to invest in infrastructure.
Johnson Controls International PLC (NYSE:JCI) is considered an environmental stock due to its commitment to sustainability and energy-efficient solutions. The company has set an ambitious net-zero Scope 1 and Scope 2 carbon emissions by 2040, a decade ahead of the Paris Climate Agreement’s target. It aims to reduce emissions by 55% by 2039 and has already achieved a 43.8% reduction from a 2017 baseline. Notably, 90% of its new product research and development investments are directed toward climate-related innovations.
In its Q1 of 2025, Johnson Controls International PLC (NYSE:JCI) reported promising financial results, with a net income of $419 million. The performance surpassed analyst expectations of projected earnings of 60 cents per share on $5.28 billion in sales by registering 63 cents per share, on revenues of $5.43 billion. Keeping up with the positive results, the company raised its full-year adjusted earnings per share guidance to a range of $3.50 to $3.60, anticipating a growth of 9% to 12%. On February 5, 2025, the company announced the appointment of Joakim Weidemanis, a former executive from Danaher, as the new CEO. To ensure a smooth transition, leaving CEO George Oliver will remain in an advisory capacity until the end of the year.
Overall, JCI ranks 9th on our list of best environmental stocks to buy. While we acknowledge the potential for JCI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than JCI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
