Sustainable energy stocks of all kinds have been a solid investment for Americans for decades. But the first year of the second Trump administration has been fraught with uncertainty for investors focused on sustainability — and the now out-of-favor ESG label.
President Donald Trump and his allies have denounced environmental, social and governance — ESG — factors as "woke" capitalism and "radical-left garbage." They are waging war on renewable energy, particularly wind and solar, while boosting fossil fuels.
The intensifying anti-ESG backlash has pushed more investors to flee U.S.-based sustainable funds. In the second quarter of 2025, those funds suffered net withdrawals of $5.7 billion, according to Morningstar. It was the 11th quarter in a row that the U.S. funds have bled money. During the first half of this year, 39 U.S. sustainable funds shut down, leaving 498.
The largest sustainable fund, Parnassus Core Equity Fund (PRBLX), experienced $10.5 billion in outflows since the beginning of 2022. Its assets were down to $28.6 billion as of June 30.
Yet even as investors yanked money out sustainable funds, a surprising and counterintuitive thing happened. During the first eight months of 2025, a leading low-carbon index outpaced a broader markets index. At the same time, a renewable-energy stock index trounced a traditional fossil fuels index.
Sustainable Stocks: Down But Not Out
Results like these are leading sustainability advocates to insist that the movement can survive Trump 2.0, with some caveats. The effort might well be rebranded. Its goals will be pursued more quietly. Executives will be under pressure to make stronger business cases for their policies. And, amid the risks, investors will prospect for profits, particularly as tech firms scramble for low-carbon sources to power their AI data centers.
These contradictions are borne out in IBD's new special report on the most sustainable companies. These companies range from energy stocks, tech heavyweights and financial giants to miners, health care firms and retailers. These are the companies successfully preparing for the transition to a low-carbon economy.
IBD's 50 Most Sustainable Companies
To build IBD's 2025 list of the 50 Most Sustainable Companies, we started with Morningstar's U.S. and global Low Carbon Transition Leaders Indexes. These indexes provide exposure to companies from each sector that are taking the most action to transition to a low-carbon economy. We sorted the constituents of the Morningstar indexes using IBD technical and fundamental stock ratings.
The result is a list of 50 stocks that combine strong climate management scores from Morningstar Sustainalytics with superior stock attributes. They are well-positioned for investors concerned about the climate and energy transitions.
The stocks had to have a price of $10 or more and sufficient data to create an IBD Composite Rating. We further qualified the list by removing stocks that did not meet or beat the S&P 500 in the past five years. We selected the companies with the highest IBD Composite Rating — all with scores of 80 or better, putting them in the top 20%.
Finally, we ranked the companies by their Morningstar Sustainalytics climate management score. We used the IBD Composite Rating to break any ties. Read the full special report.
"Investors increasingly view sustainability factors as material drivers of long-term performance," said Margaret Stafford. Stafford is associate director of product management for Morningstar Indexes. "The Morningstar Low Carbon Transition Leaders Index Series, along with our global research, ratings, and data, helps investors distinguish companies genuinely advancing the climate transition from those merely talking about it."
Ranking atop the list this year are electrical power system stock Eaton, Bank of Montreal and sustainable engineering consultant firm Stantec.
Read More About The Winning Stocks On Our Most Sustainable Companies List: Eaton, Nvidia and Eli Lilly.
A 'Terrible Time' For Sustainability-Focused Climate Investors
This has been a "terrible time" for ESG-oriented investors and people concerned about climate change, said Hortense Bioy, head of sustainable investing research at Morningstar Sustainalytics. "But a backlash never lasts forever. They know it's going to turn around at some point."
To be sure, the hostility emanating from Washington represents a major obstacle for environmentally and socially conscious investors.
Demand for sustainability persists, however, particularly among younger investors and some institutional ones. Renewable energy's cost advantages and climate benefits remain appealing.
Nearly 90% of investors globally say they are interested in investing in companies or funds that aim to achieve market-rate financial returns while also considering positive social and/or environmental outcomes. On a like-for-like basis, interest levels in the U.S. and Europe are nearly unchanged from late 2023. That's according to the Morgan Stanley Institute for Sustainable Investing's 2025 Sustainable Signals: Individual Investors report.
The Morgan Stanley report also reveals Gen Z (99% of respondents) and millennials (97%) show higher levels of interest. And for the 59% of investors who plan to increase sustainable investments in the next year, confidence in performance is the top reason.
Clean Energy Stocks Vs. Fossil Fuels
Since last November's election, the average mutual fund and ETF that focuses on sustainable energy stocks has outperformed the average fossil fuel fund. Oil prices have sagged amid softening global demand and "drill, baby, drill" policies that expand supply.
Through August of this year, the Morningstar Global Markets Renewable Energy Index gained 19.4%, while the non-ESG Morningstar Global Energy Index rose 11.2%.
During the same period, Morningstar's Developed Markets Low Carbon Transition Leaders Index rose 14.6% — more than matching the 14.3% increase of Morningstar's Developed Markets Index, a broad measure of global stocks across sectors.
Think tank Ember just reported that solar and wind outpaced demand growth in the first half of 2025, as renewables overtook coal's share in the global electricity mix.
AI Stocks Like Amazon, Meta, Microsoft Hunger For Power
Power-hungry tech companies — including Microsoft, which also is on IBD's Most Sustainable list — are driving up demand for carbon-free electricity for their data centers. "Corporate clean energy procurement maintained solid momentum during the first few months of Trump's second term in office, despite all the chatter around the new administration having a new U.S. energy focus," according to a report by S&P Global Market Intelligence.
Lower Rates Fuel Green-Energy Stocks
Some green energy stocks and funds were beaten down so much that they had potential to rally when the news was good. Or at least less bad than feared.
In August, on the day Federal Reserve Chair Jerome Powell opened the door to interest-rate cuts, several clean-energy stocks surged 5% to 10%. Lower interest rates benefit green-energy businesses because they typically have to borrow money to finance growth and new projects.
Steven Rothstein, chief program officer at Ceres, a nonprofit organization working to accelerate the transition to a cleaner economy, said that sustainability can "absolutely" outlast the current political headwinds. "Investors and companies understand that Mother Nature doesn't know who is president or prime minister, that fires and floods continue, and there continue to be growth opportunities," he said.
Last year, Rothstein noted, more than $2.1 trillion was invested globally in the low-carbon transition. Renewables accounted for more than 90% of the new electricity that came online in the U.S. "I am sobered by the short term," he said. "And optimistic about the medium and long term."
A Tale of Two Continents
With federal support for renewables shrinking, sustainability investors can also go prospecting in Democrat-run states that continue to pursue sustainable policies. This is particularly true in California, which, if it were its own nation, would be the world's fourth-largest economy.
"It's important not to consider the U.S. as a homogenous market," said Morningstar's Bioy. "There are states that are more progressive and more interested in pushing companies to be more sustainable and be more transparent about the risks related to the environment. Every state has its own agenda and its own drivers for ESG."
Worldwide, backing for sustainable investment has turned into a tale of two continents. Europe has the highest historical support for social investing and strongest environmental regulations. The EU accounts for 85% of global sustainable fund assets, followed by the United States at 10%. Sustainable funds represent nearly 20% of the open-end funds and ETFs in Europe. That compares to just 1% in the U.S.
"The world is a bigger place than the United States. Most of the world is going in a different direction," said Alex Friedman, CEO of Novata, a software and data company that helps clients measure and manage their sustainability and carbon data. "If everyone thinks something is going one way, ask them why it can't go the other way. If (sustainability) seems dead to so many people in the United States, then that means we probably have to look very hard at whether it's really dead or just an opportunity in another form."
Clean Energy Stocks Focus On Returns
Sustainable investing, sometimes referred to as investing to "do good," looks toward approaches that extend beyond short-term profits and consider longer-term impacts. ESG metrics are the criteria that investors use to evaluate companies in such areas as their carbon footprint, employee treatment and shareholder rights.
Critics of ESG say corporate executives should focus exclusively on return on investment, not environmental factors, social considerations or government handouts. They are gleeful about the steps taken by the Trump administration and Congress so far.
Trump's signature domestic policy legislation, enacted in July, repealed nearly half a trillion dollars in federal green-energy subsidies. Tax credits for electric-vehicle purchases and leases ended Sept. 30. Credits for rooftop solar installations expire on Dec. 31. In the first half of this year, U.S. spending on renewable energy projects dropped by $20.5 billion, or 36%, from the second half of last year.
The Securities and Exchange Commission is scrapping a regulation that requires publicly traded companies to disclose their climate risks and greenhouse gas emissions. The Labor Department is rolling back a Biden-era rule that allows retirement plans to consider ESG metrics when they choose investments.
To be sure, investors are focusing on return on investment. Morningstar says in its Sustainable Signals report that the top reason investors plan to increase their portfolio allocation to sustainable investments in the coming year is "a growing confidence that these options offer comparable or better returns than traditional investments." This view is strongest among younger investors and those in the Asia-Pacific region, although this is the leading driver across all regions.
Executive Challenges To State Policies
A federal executive order, issued in April, directs the attorney general to identify and challenge state policies that involve ESG initiatives or seek to address climate change.
"These state laws and policies weaken our national security and devastate Americans by driving up energy costs for families coast-to-coast," the order states. Anti-ESG activists said that what some sustainability investors regard as light at the end of the tunnel is really a train coming at the movement.
"We've been investing countless shareholder dollars in this thing called sustainability. No one can even agree on what that actually is," said Stefan Padfield. He's executive director of the Free Enterprise Project at the National Center for Public Policy Research, a conservative think tank. The project describes itself as the leading opponent of American corporate wokeness.
"You're telling me that only now, because the Trump administration came in, you think you need to make the business case and ROI analysis. I think that is shocking and telling," Padfield said. "There's still a lot of work to be done by those of us who believe (ESG criteria) are harmful to the bottom line, harmful to shareholder value. We are going to expose these executives and hold them accountable."
From 'Greenwashing' To 'Greenhushing' — Clean Energy Stocks In The Crossfire
For corporations, sustainability has turned into a minefield. Press ahead with climate-conscious initiatives, and they risk being targeted by the White House and anti-ESG activists. Roll back their efforts, and they are in the crosshairs of Democrats and environmentalists.
With the political winds shifting in Washington, scores of major companies abandoned or weakened their "net-zero" climate goals to reduce greenhouse gas emissions. To prevent political targeting, some companies that fund sustainable projects are avoiding labeling their bonds as green.
A few years ago, the term "greenwashing" was in vogue. It was used to describe the deceptive ways some corporations use to portray themselves as more environmentally friendly than they are. Now businesses are taking steps to stay quiet about their climate strategies. That practice has been dubbed "greenhushing."
"Companies are still doing most of what they were doing before," Ceres' Rothstein said. "They are talking about it less."
Sustainability By Any Other Name
The term "ESG" has been part of the names of many socially conscious mutual funds and exchange traded funds. But it appears to be going by the wayside.
In Europe, more than 600 ESG funds changed their names in the second quarter of this year. They started using words like "screened" or "transition" or "committed" or "thoughtful" or "enhanced" instead.
Polls show that most of the public doesn't know what ESG is. Even sustainability advocates are questioning whether it made sense to lump ESG factors together in the first place.
Doing so was "probably not ideal, with the benefit of hindsight," acknowledged Novata CEO Friedman.
"ESG may be dead, but risk is very much alive. It's a competitive advantage to be better at risk analysis than others," he said. "Financial material risks, within what had been called ESG, affect your bottom line. Getting your arms around them is a very smart way to invest."
IBD's special reports are objective and data-based. This independent special report is produced by the IBD editorial team. There is no sponsored content, nor are there any commission links. A company cannot apply to get on this list, and there are no fees.
