Direct tax incentives for individual investors are one of the policy measures that governments use to generate funds to develop the sustainable business sector. There are a number of arguments in favor of these measures. Existing research in behavioral science shows that the majority of investors perceive sustainable businesses as less profitable. It is also known, at least so far, that companies which follow sustainable commercial practices find it harder to attract investors. Several governments have identified this issue and enacted tax incentives specifically designed to encourage investors to turn to sustainable businesses. This type of economic policy approach is, however, still very rare, and the literature on the topic is sparse. This article seeks to provide input from a legal standpoint, highlighting the rationale and feasibility in the light of the fundamental principles of taxation, as well as of EU state aid rules, because this is an issue that inevitably arises. In particular, it analyzes whether encouraging sustainable investments via direct tax relief for investors is compatible with the legal framework for EU state aid and Swiss legislation. Depending on how such tax incentives are structured, we argue that they can be compatible with both.