We recently published a list of 10 Best Environmental Stocks to Buy. In this article, we are going to take a look at where Trane Technologies plc (NYSE:TT) 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 worker inspecting a newly installed heating unit in a modern home.

Trane Technologies plc (NYSE:TT)

 Number of Hedge Fund Holders: 62

Yet another manufacturer of HVAC systems and climate solutions, Trane Technologies plc (NYSE:TT) is known as a climate innovations leader in the sustainability solutions space. The company produces efficient solutions for buildings and transportation under its two brands, Trane and Thermo King. The company was recently recognized in the Top 10 of JUST 100 2025, by JUST Capital solidifying its position as a climate solutions leader.

Trane Technologies plc (NYSE:TT) constantly works towards expanding its sustainable activities and has invested $470 million in 2024 in mergers and acquisitions aimed at building AI servicing capabilities. The most recent is a critical expansion in its thermal management systems capabilities that will cater to mission-critical infrastructure and environments, and the launch of its new liquid cooling Trane Coolant Distribution Unit (CDU) providing cooling solutions for the IT racks and data centers. Trane Technologies plc (NYSE:TT) saw a 12% year-over-year increase in revenue in 2024, touching a $19.3 billion mark, and a revenue of $4.8 billion in Q4. The company is looking at its commercial HVAC segments in data centers, education, healthcare, and services to continue to drive revenue growth in 2025. However, the stock still seems to be grappling with the DeepSeek news in its AI systems and looming market concerns. However, leadership changes and the onboarding of Xylem’s CEO as the new President might be indicative of interesting updates and expertise in sustainability, in its position as an environmental stock.

Overall, TT ranks 6th on our list of best environmental stocks to buy. While we acknowledge the potential for TT 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 TT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap

Disclosure: None. This article is originally published at Insider Monkey.