"There's more demand for fossil-free funds from investors," said David Kathman, a mutual fund analyst at Morningstar. "People want to have that option. With oil prices so up and down, there's more volatility anyway."
Tools are increasingly popping up for vetting mutual funds like these and helping investors make their funds underlying stock holdings transparent. One is FossilFreeFunds.org, where you can find out if your fund owns one of the 200 largest companies with oil, gas and coal reserves.
This risk is also worrying Wall Street.
This past summer Citigroup issued a report predicting that $100 trillion of fossil-fuel assets are at risk of never being used.
That is a calculation based on the stated target for the December climate conference in Paris to limit global warming to 2 degrees Celsius. To meet that goal, one half of global gas and 80 percent of global coal reserves need to stay in the ground, the Citigroup report stated.
"There are lots of regulatory risks that fossil-fuel stocks have," said Julie Gorte, senior vice president for sustainable investing at PAX World Management. "There's also litigation risks," she added. The Pax World Growth Fund (PXGAX) doesn't own any fossil-fuel stocks.
Citigroup is optimistic, though, that big emitters "seem to be coming to the table with positively aligned intentions."