WHEN IT COMES TO

the environment, General Electric hasn't exactly topped anybody's green list. This is the company, after all, that dumped millions of pounds of toxic chemicals into the Hudson River from the 1940s to the 1970s, creating the need for a $700 million cleanup over the next several years. But the Fairfield, Conn.-based conglomerate has shifted gears. In 2007 alone it spent about $1 billion on research in environmentally friendly technologies, and today it has more than 50 eco-friendly products, including energy-efficient lightbulbs, jet engines and billion-dollar water-desalinization plants. And unlike in the Hudson River case, GE isn't being forced by the government to do any of this. It has another, more powerful motive: profit.

GE isn't the only company going green. Over the next several decades, billions of dollars will be spent on technologies and products that improve energy efficiency, clean up water systems and reduce dependence on fossil fuels. Most of that money will be coming from the private sector. Although capitalism might not single-handedly halt climate change, that's not stopping thousands of firms from doing their bit to save the planet. The green these firms see isn't just the color of a healthier planet. It's the money to be made helping to stop the potentially catastrophic effects of climate change. And the best news for investors is that there are plenty of companies turning a profit through environmentally friendly products and services.

Many of these "green wave" stocks have already seen big gains, so they are not cheap. And since this sector changes fast, companies that have spectacular sales now could be left behind if a more promising technology comes along, especially if there are more government mandates and subsidies to combat global warming. While experts still differ over the pace of global warming, some 2,000 scientists from around the world agreed last year that climate change is real and man-made. The only other thing that can get that type of scientific consensus is "that the world is round," quips Jeremy Grantham, investment strategist at GMO.

Environmentally friendly investing isn't limited to buying into solar cells and other forms of alternative energy. More than 300 million energy-efficient lightbulbs were sold in North America in 2007, a 50% increase from 2006. Meanwhile, utility companies around the world are investing in superconducting ceramic wire, which can carry electricity far more efficiently than a conventional copper wire. And water is one of the biggest areas of environmental investment. The U.S. Environmental Protection Agency says the nation has to spend more than $250 billion over the next two decades to stabilize or improve water quality. That's just a drop in the bucket compared with the amount the rest of the world needs to spend. "We've seen a lot of excitement already, but it's just beginning," says Jens Peers, head of eco-investing for KBC Asset Management and portfolio manager for the Calvert Global Alternative Energy fund.

To find the most promising green-wave investments, SmartMoney researched environmentally friendly products and services that customers are buying now. Then we looked for companies that get a large percentage of their sales or profit from these products. The result: companies that should help not only the planet but also their investors.

Philips (

Helping cut back on energy use is as easy as changing a lightbulb. A compact fluorescent lightbulb, or CFL, lasts several times longer and uses far less electricity than traditional incandescent bulbs. Now that the price of energy-efficient bulbs is below $5, consumers are starting to embrace them, with Wal-Mart alone selling 100 million in 2007.

At Philips, lighting accounts for 23% of the company's $37 billion in annual sales but brings in more than 35% of the $3.0 billion annual operating profit. The newer energy-efficient bulbs are more profitable for the Dutch company than conventional bulbs, even though prices of the energy-efficient bulbs have dropped. And the recent energy law signed by President Bush phases out sales of traditional incandescent lightbulbs by 2014.

Kaj den Daas, chairman of Philips Lighting North America, says there's plenty of growth ahead, since CFLs make up less than 10% of the 12 billion lightbulbs sold worldwide. Philips also has made huge investments in light-emitting diodes, or LEDs. The technology has been around for more than 50 years and always has been energy efficient, but only recently have engineers made LEDs bright enough to use in traffic signals, electronic billboards and other commercial applications.

Philips' stock tumbled in the fall because of declining sales in its medical-imaging division, which makes up a quarter of the firm's total revenue. The company's net income is expected to decline in 2008 because Philips had $3 billion in gains from selling off businesses in 2007. But earnings per share are expected to rise because the company plans to repurchase more than $7 billion worth of its shares over the next two years, about 17% of Philips' current $42 billion market value. Analysts expect earnings per share to grow 19% in 2008, to $2.60. That, combined with the firm's trading at 14 times next year's expected profit, makes Philips an attractive value.

Veolia Environnement (

The world is covered with water, but less than 1% of it is for drinking. And drought, pollution and rainfall-pattern changes are putting even that supply at risk. All of which places a premium on ensuring the infrastructure that brings water to us is clean and efficient. But many municipal water systems were built a century ago or more, and that leads to waste. About 20% of water that leaves water-treatment plants doesn't make it to the faucet because of leaky pipes, estimates KBC Asset

Management's Peers. Enter Veolia, a French company that has been handling water supply, in one form or another, since the 1850s. Today it is the world's largest provider of water services, with more than $14 billion in annual water-related revenue. Veolia seeks out municipalities with crumbling water systems but without the money to fix them. The company takes over the water system and makes improvements, often passing the costs to customers and making a specified profit margin. In the United States alone, there are thousands of small municipalities that own their water systems, many of which lack the funds to upgrade on their own. "If the choice is running dry or not, the choice will be to privatize," says Edward Kerschner, chief investment strategist for

Citi Global Wealth Management. Veolia's other businesses also have a tinge of green: It recycles waste, operates public transit systems and manages energy. The firm is the world's second-largest builder of desalinization plants. And while plants that turn saltwater into freshwater are not cheap, nor particularly good for the broader environment, they do supply drinkable water to places that don't have much of it. Analysts expect Veolia to earn about $1.7 billion in 2008, a 21% increase from 2007. At 20 times next year's profits, the stock is not inexpensive for a utility, but few utilities have such high earnings growth.

SunPower (

Solar power has been around for decades, but only recently has it become a viable alternative-energy source. The cost of producing a kilowatt hour of electricity with solar power has declined from more than 50 cents to about 25 cents, putting it closer to coal's less than 10 cents per kilowatt hour. And that price will go even lower as solar companies improve cell efficiency and a temporary shortage of silicon, a cell's main ingredient, eases in 2009. Solar power is moving away from being a marginal niche technology and into something that can become a major power source, says Hiroyasu Sato, an analyst with Daiwa Securities.

San Jose, Calif.-based SunPower, which has been around since 1985, makes cells that are the most efficient at converting the rays of the sun into electricity. Its revenue tripled in 2007, to more than $700 million, and is expected to increase another 60% in 2008. SunPower recently built massive solar-power stations in Nevada and Portugal, each of which can power several thousand homes while emitting a fraction of the pollutants of a coal-power plant. In January 2007, SunPower bought solar-cell installer PowerLight, ensuring that SunPower's own cells will get placement in a variety of new solar-power stations being built around the world.

SunPower's shares have nearly doubled in less than a year and trade at a hefty 38 times estimated 2008 earnings of $167 million, or $2.03 a share. Jens Peers of KBC Asset Management is leery of many solar firms in 2008 because their shares have soared. But he says SunPower is ideally placed because it already has a stable supply of silicon, while many of its rivals are searching for sources. If SunPower increases 2008 per-share profits by 64%, as analysts expect, then it's not so pricey.