Europe’s plan to kick-start its economy while shrinking its carbon footprint is throwing up new opportunities for investors.

Shares in renewable-energy companies and insulation providers have advanced this year, in contrast to the plunge in oil-and-gas companies’ stocks and a retreat in the broader market. Investors are betting these firms will benefit from the European Union’s ambitious proposal to stop damaging the environment by 2050, which the bloc aims to bake into its economic recovery plan.