Fighting climate change has become one of the popular agendas for governments and businesses globally. Not only has it become the necessity of the hour, it also attracts millions in investment. Per a Deloitte report, the New Climate Economy findings state that low-carbon growth can deliver $26 trillion in economic benefits globally by 2030.

The long-term heating of Earth's climate system or global warming is already melting polar ice caps and increasing the sea level. The COP26 climate summit in Glasgow emphasized cutting CO2 emissions to limit global temperature rise to 1.5 Celsius. Almost 200 countries that participated in the summit have been asked to cut down emission and its major impact on day-to-day life. 

In America, after the more than $1-trillion infrastructure bill, President Joe Biden is also looking forward to implementing a $1.75-trillion investment in the social safety net and climate policy. In his election campaign, climate change and clean energy have been a prime agenda for Biden and he does have expansionary plans. The President envisions America to become a 100% clean energy economy by 2035 and achieve net-zero emission by 2050 to address the issue of climate emergency.

The transportation sector is one of the largest contributors to greenhouse gas emissions. Hence, adopting electric cars and trucks is the way to combat climate change. On Nov 3, the Democratic lawmakers unveiled revised social spending and climate provision. This plan would expand an electric vehicle tax credit of up to $12,500 for more expensive cars and propose a lower income cut-off for buyers eligible for the credit. The new proposal also includes a $4,500 tax incentive to purchase an electric vehicle made at a unionized factory.

The environmental, social, and governance (ESG) label has now been slapped on several financial assets and instruments but do they genuinely align with sustainable ESG practices? Well, that’s a tricky question for investors to answer. However, it is an attractive investment trend and has drawn massive inflows in recent years. Several mainstream companies like Crispr Therapeutics are adopting genome-editing practices to modify plants to benefit the energy sector (for generating bio-fuel). Some are also working on agriculture in food, using the abundant saltwater.

3 Funds to Buy

In an attempt to slow down climate change, electric vehicles, smart-home tools and clean energy sectors are poised to grow. Hence,we have shortlisted three funds poised to grow. These funds flaunt a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.

We expect these funds to outperform peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also the likely future success of the fund.

The question here is: why should investors consider mutual funds? Reduced transaction costs and portfolio diversification without several commission charges associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Fidelity Select Utilities Portfolio (FSUTX Quick QuoteFSUTX - Free Report) aims for capital appreciation. This non-diversified fund invests most assets in common stocks of companies, primarily engaged in the utilities industry and generating most of their revenues from utility operations.

This Zacks Sector – Utilities has a history of positive total returns for more than 10 years. Specifically, FSUTX has returned 9.9% and 11.4% in the past three and five-year period, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

Fidelity Select Utilities Portfolio has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.76%.

New Alternatives Fund Class A (NALFX Quick QuoteNALFX - Free Report) aims for long-term capital appreciation, with income being the secondary objective. The fund invests in common stocks of YieldCos, American Depository Receipts, real estate investment trusts and publicly-traded master limited partnerships.

This Zacks Sector – Other product has a history of positive total returns for more than 10 years. NALFX has three and five-year return of 32.4% and 19.9%, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

New Alternatives Fund Class A has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.96%.

Calvert Global Energy Solutions Fund Class A (CGAEX Quick QuoteCGAEX - Free Report) aims to track the performance of the Calvert Global Energy Research Index. The fund invests a majority of assets in companies whose main business is sustainable energy solutions. The portfolio consists of companies engaged in facilitating the transition to a more sustainable economy by reducing greenhouse gas emissions and the expanded use of renewable energy sources.

This Zacks Sector – Other product has a history of positive total returns for more than 10 years. CGAEX has three and five-year return of 23.8% and 16.8%, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

Calvert Global Energy Solutions Fund Class A has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 1.24%.

Want key mutual fund info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>