For investors looking to support the battle against climate change, technologies aimed at removing carbon dioxide from manufacturing or the atmosphere hold promise. However, investment options can be hard to find, even as surging demand for electricity from the artificial intelligence frenzy is driving the need for carbon removal and seeing growth for solutions, led by Microsoft MSFT.
Carbon removal is tricky for investors to navigate. Many companies are young and risky, while others are accessible only through private markets. But there are a handful of stocks and exchange-traded funds that can provide a way to back—and potentially profit from—these technologies.
Carbon Removal Techniques
Reducing emissions is seen as the most effective approach to fighting global warming. “It’s cheaper to turn down the tap of emissions into the overflowing bathtub than to invent a better teaspoon for removing the water,” says Zach Stein, co-founder of Carbon Collective, an investment platform for climate solutions.
But climate scientists say more needs to be done. To keep global warming to 1.5 degrees Celsius above pre-industrial levels, around 10 billion tons of CO₂ need to be removed from the atmosphere annually by 2050, according to the Intergovernmental Panel on Climate Change. The global carbon removal market is projected to hit $100 billion by 2030.
Broadly, there are nature-based and engineering-based approaches to carbon removal. The nonprofit Rocky Mountain Institute tags 32 different ways. “We likely need scalable forms of all of these technologies to be ready,” says Stein.
Nature-Based Carbon Removal Solutions
These methods involve the conservation, restoration, and management of ecosystems to remove CO₂ from the atmosphere. Carbon is key for plant growth, for example. Supporting these ecosystems helps reduce the effects of climate change by capturing CO₂ and sequestering it in plants, soil, and sediment.
Soil Carbon Sequestration
This strategy uses regenerative farming practices, such as cover cropping, rotational grazing, and reduced tillage, to pull carbon from the atmosphere and store it in the soil. The healthier and more nutrient-rich the soil, the more effectively it can capture and retain carbon.
“Almost half of the world’s habitable land is used for agriculture,” says Stephen Hester, vice president of investments at CommonGood Capital, which sponsors Agriculture Capital Carbon Farmland Fund. The fund acquires farmland and leases it to regenerative farmers. “The goal is to transition as much land possible to a healthier, more resilient state.” Companies like CommonGood Capital can measure the amount of carbon in soil, which can be monetized into carbon credits.
Forests
Two other nature-based solutions are planting forests where none existed before (afforestation) or replanting trees in areas that have been cleared or degraded through human activity such as logging (reforestation).
Reforestation can restore damaged ecosystems and is crucial in carbon removal from the atmosphere. Add carbon credits and a carbon market, and there are plenty of ways to make money. It’s a lot like what happened in the 1990s, when investors bought airports for landing fees but realized they could add Louis Vuitton stores and increase their asset value.
In government-run carbon markets, such as those in Australia and New Zealand, forestry operators can enroll their properties and sell their carbon credits to emitters. “Now you have land, trees, water, property rights, wind farms, solar farms—a host of option value,” says David Brand, founder of New Forests, an institutional investment manager. “It’s driving a whole new level of sophistication and granularity in how these assets are managed.” Brand is working with the International Sustainable Forestry Coalition, a not-for-profit of major forestry companies managing 76 million acres of forests in 39 countries, to support sustainable forest management.
“One of the things that gets missed in the discussion is that if you’re doing this right, you also could be creating another market,” says Steve Liberatore, head of ESG/Impact for global fixed income at Nuveen.
Engineering-Based Carbon Removal
These strategies include technologies that extract carbon from the atmosphere, including direct air capture, carbon capture and storage, enhanced rock weathering, and other techniques.
Carbon Capture
This approach entails collecting carbon dioxide from an emitter before it enters the atmosphere, then sequestering it. Direct Air Capture uses machines to suck carbon from the air and store it underground or use it in products like concrete. You can find out more about carbon capture here. Be forewarned: Critics regard carbon capture as a “license to pollute.”
Bioenergy with Carbon Capture and Storage
This involves burning biomass for energy, capturing the CO₂ from the combustion, and storing it underground. For example, investment firm Ballast Rock is funding a biofuel and carbon sequestration company in Louisiana that converts waste material from sustainable local forests into renewable sustainable aviation fuel and naphtha. It will capture and sequester the carbon emissions released during the process.
Carbon Mineralization
This accelerates a natural geochemical process that turns gaseous CO₂ into solid mineral form. One such company is privately held Arca, which repurposes mine waste by using solar-powered industrial robots to churn mine tailings. It recently agreed to remove 300,000 metric tons of carbon for Microsoft.
Arca pays companies to get access to their mine waste, helping miners improve the economics of a project. Arca CEO Paul Needham thinks there’s enough mine waste on earth to capture around 6.5 gigatons of CO₂. But best to cut emissions, too; last year, total energy-related CO₂ emissions clocked in at an all-time high of 37.8 gigatons.
What’s Driving Carbon Removal?
According to the International Energy Agency, electricity demand from data centers worldwide will more than double by 2030, with AI being the most significant driver of this increase. Electricity demand from AI data centers is projected to more than quadruple by 2030.
Microsoft dominates the carbon removal market, accounting for around $8 billion of the $9.5 billion market. Put simply, these companies can sell certificates providing holders the right to emit a set amount of carbon dioxide credits or a carbon-equivalent quantity of greenhouse gas emissions.
Carbon markets exist in two formats. Compliance carbon markets are regulated by governments; they are marketplaces where permits to emit carbon are bought and sold. Regulated entities in these markets, like utilities and gas companies, are mandated to turn in permits for every ton of carbon they emit. These are traded in several countries around the world, frequently through a cap-and-trade system that allows emissions to be capped and markets to allocate emissions as needed. Meanwhile, in voluntary carbon markets, carbon offsets—projects that decrease the amount of carbon in the system—are bought and sold. The goal is to put a price on carbon emissions.
Consider the $250 million deal in which privately held Chestnut Carbon will deliver 7 million tons of carbon removal credits over 25 years to Microsoft by planting 35 million trees in the southeastern United States. Alphabet, Meta Platforms, and Amazon are also paying for carbon removal. This year, Frontier—which was founded by Alphabet, Shopify, Meta, and others—signed a $31 million agreement enabling Canada-based Planetary Technologies to remove 115,000 tons of carbon by adding alkaline materials to seawater.
“Carbon removal is at the forefront of most corporations’ mindsets, especially for tech firms ted to the data center rollout and data center buildout,” says Nuveen’s Liberatore. Indeed, carbon removal appeared on Alphabet’s proxy statement this year, as Trillium Asset Management asked the company to estimate how many metric tons of carbon removal was required to compensate for its emissions, among other things. The larger proposal was supported by 8% of shareholders. “We really do want to see companies do emissions reduction first and then for the part that’s hard to abate go to carbon removal,” says Andrea Ranger, director of shareholder advocacy at Trillium.
How to Invest in Carbon Removal
It’s important that investors recognize these are nascent technologies, and some regard them as risky. Because there are so few direct plays among public companies, it’s hard for individuals to invest. For many individuals, “the only way to even indirectly invest in carbon removal technologies in US markets is to invest in oil companies,” says Stein of Carbon Collective.
For example, Occidental Petroleum has invested in DAC technology, but it’s a minor part of the firm’s business. In 2024, oil and gas accounted for 81% of $26.7 billion in revenues, chemicals for 18.4%, and midstream and marketing for the rest.
Carbon capture is also very capital-intensive. “That makes it better-suited to private investment instead of public, for now,” says Max Jackson, a private credit portfolio manager at Ballast Rock. “A lot of small companies are finding their footing right now. It’s earlier in their life cycle than it is for conventional renewable energy,” where there are plenty of seasoned companies.
For now, most investing in carbon removal is done via the private markets. “More private transactions need to be done before you see a track record and the broader public investing base can correctly value these companies,” says Jackson. That may happen in the next two years amid increased activity in carbon removal.
Jackson brings up the parallel of the stickiness of renewable energy, which was once viewed with skepticism. Despite policy changes from the current presidential administration, renewables are still expected to account for 80% of new generation added to the US grid this year. Jackson says, “We’re at the inflection point where more broad-based carbon removal will come to forefront.”
Carbon Removal Stocks
There are some publicly traded stocks that offer investors direct or indirect access to companies pursuing carbon removal strategies.
California Resources Corporation CRC does natural gas exploration and production in California, but it focuses on maximizing its resources for decarbonization by developing carbon capture and storage and other emissions-reducing projects.Norway’s Aker Carbon Capture AKCCF specializes in carbon capture technology for industries like cement, waste-to-energy, and oil and gas, using a proprietary amine-based solvent to absorb CO₂ from emissions.Drax Group DRXGF is a utility company that has been building carbon removal tech at many new plants and has announced carbon removal goals.Net Power NPWR supports gas-fired plants that capture emissions. The plants combust natural gas with pure oxygen, creating water and carbon dioxide. Most is recirculated back into its power generation system, while excess CO₂ is sold to industry or sequestered.CF Industries CF invests in carbon capture and sequestration technology, and it partners with ExxonMobil and others on carbon capture projects.Timber REIT WeyerHaeuser WY is a one of the largest private owners of timberlands in the US, earning most of its revenue from harvesting and selling timber. It’s a member of the International Sustainable Forestry Coalition. Weyerhaueser owns 10 million acres of timberland in the US. It also owns projects in wind and solar, bioenergy, and carbon capture and sequestration. The REIT is currently trading at a 22% UPDATE discount to its fair value.Rayonier RYN is the second-largest timberland REIT in the US, managing 2.6 million acres of timberland. The company practices ethical land stewardship, ensuring their working forests remove more carbon than they emit. Rayonier is currently trading 13% below its fair value.
Carbon-Related ETFs
One can also invest in carbon-related exchange-traded funds, such as KraneShares Global Carbon ETF KRBN, which is benchmarked to the S&P Global Carbon Credit Index, which covers major European and North American cap-and-trade programs and tracks the most traded carbon credit futures contracts.
KraneShares California Carbon Allowance Strategy ETF KCCA and KraneShares European Carb Allowance Strategy ETF KEUA provide regional exposures. Such markets make it more expensive to pollute and incentivize companies to invest in emissions reduction or carbon removal. Luke Oliver, head of climate investments for KraneShares, says, “By putting a price on carbon, suddenly any company is optimizing CO₂ exposure and any carbon captured has a price tag.”
Other Carbon Removal Investment Options
Climate-related funds may also have indirect exposure. We survey such funds here. Then there are green bonds, which tie the use of proceeds to environmental themes like building solar generation. These bonds can finance carbon removal projects.
Currently, only “a handful” of transactions in public fixed-income markets “are directly tied to the creation and selling of carbon credits,” says Nuveen’s Liberatore. His funds have invested in two types of carbon credits, including providing ceramic water filters in Vietnam to entities that previously burned biomass to create potable water, as well as working with landowners in the Amazon to replant native species and generate carbon removal credits.
