Use these green stocks to boost your ESG portfolio.
Environmental, social and governance, or ESG, issues are becoming more and more important to investors. “Global ESG assets are on track to exceed $53 trillion by 2025, representing more than a third of projected total global assets under management,” says Danene Cronin, financial advisor with Morgan Stanley. As the effects of climate change become more acute, the environmental portion of this type of investment arguably has never been more important. But as with any type of stock market purchase, you’ll want to do your homework, which may include considering these seven green stocks. “Like anything that is worth doing well, building a green portfolio can take time and patience,” Cronin says.
Beyond Meat Inc. (ticker: BYND)
With livestock production being a huge source of greenhouse gases, deforestation and water pollution, many investors “realize that we won’t fix climate change without fixing the food and material supply system,” says Elysabeth Alfano, CEO of VegTech Invest. With a Beyond Meat burger requiring less water, land and energy while producing fewer greenhouse gases than a conventional animal-based burger, she points to this stock as one of her top picks for green investment. “Beyond’s international growth is often overlooked, and this plant-based giant continues to grow fast outside of the U.S.,” she says. “Beyond is putting plant-based meat on the map in other countries.”
Ginkgo Bioworks Holdings Inc. (DNA)
Investors looking to green up their portfolios should look for companies that are innovating in the food and material supply chain, Alfano says. “It is the technology, innovations and game-changing processes in the alternative proteins sector, like fermented proteins, cultivated meat and plant-based advancements, that create the efficiencies up and down the supply chain that will win in the end,” she says. One of her top picks is Ginkgo Bioworks, which in partnership with Motif FoodWorks is developing meat, dairy and plant-based proteins using fermentation instead of animal agriculture. “Ginkgo has strong revenue growth, enough cash to weather a downturn, promising long-term growth potential, and is available at an attractive price,” Alfano says.
Amyris Inc. (AMRS)
Alfano sees the “beginnings of a megatrend of plant-based innovation and alternative proteins consumption,” she says. “Many investors see this trend and want to get in early for their wallet and for their family’s future.” Alfano likes biotechnology company Amyris, which makes ingredients used in cosmetics with lab-created molecules that are “bioidentical” to those found in nature. The company also has a joint venture with Minerva Foods to develop fermentation-based protein as an alternative to animal-based protein. “Given a long track record of producing ingredients inexpensively and with high margins, we think they are well positioned to grow,” Alfano says.
Local Bounti Corp. (LOCL)
Innovations in the food and materials supply chain “will allow us to produce more food, using fewer resources, that is more nutritious and less expensive, in time,” Alfano says. For a company making it possible to grow food with less land and water than conventional farming, she points to Local Bounti, which employs a greenhouse production system that results in a smaller carbon footprint and less waste. “Grown close to population centers, (its produce) can contribute less to food waste by arriving quickly and with less spoilage,” Alfano says. The company recently acquired indoor farming company Hollandia Produce Group, which Alfano says “has good distribution capabilities to approximately 10,000 retail locations in North America.”
Plug Power Inc. (PLUG)
Plug Power is a hydrogen fuel cell company that also makes devices that separate hydrogen from oxygen, called electrolyzers. Hydrogen fuel cells are an alternative to the lithium-based batteries that electric vehicles use. Although fuel cells likely won’t completely replace batteries because of cost and energy-efficiency issues, “despite these drawbacks, hydrogen fuel cell technology is poised to become a competitor to traditional batteries, and Plug Power has a significant head start in this area of the renewable energy space,” says Julia Spina, a financial researcher with tastytrade. “While liquidity is one of the largest factors impacting the tradability of clean energy stocks, certain stocks are exceptions,” she says. “PLUG, for instance, has frequently outpaced Chevron in daily volume since 2020.”
Enphase Energy Inc. (ENPH)
Although oil and natural gas stocks have outperformed the market recently as various factors have boosted the price of those commodities, they tend to underperform over a longer time frame. The energy sector gained about 15% over the past five years through April 12, compared with the S&P 500’s nearly 88% rise. “Arguably, a nontraditional portfolio including clean energy assets may very well have outperformed a traditional portfolio including traditional oil- and gas-heavy stocks over the past five years,” Spina says, pointing to solar company Enphase as a green stock with tremendous outperformance. It’s risen nearly 13,800% in the five years through April 12. Enphase is among the green companies with an analyst consensus of “strong buy” on TipRanks. Analysts like those companies because of “their leading positions in renewable energy and commitment to expanding these efforts in the future,” says Uri Gruenbaum, CEO of the retail financial data platform. “As consumer demand for green energy grows, especially in areas like solar/renewable power, these companies stand to benefit.”
Republic Services Inc. (RSG)
With the solid waste management industry expected to grow by 2.5% a year between now and 2025 globally, Republic Services is a standout among providers, says Sankar Sharma, CEO of RiskRewardReturn.com. The company has strong operations and high growth potential even though it has already been outperforming the market, he says. “The possible price target is $158 and then $170,” he says. “Lots of room to run.” The stock closed at $133.91 on April 12. Each year, Republic processes about 6 million tons of recycling at 91 recycling centers, the company says. The company also has more than 3,100 alternative-fuel vehicles and is working on innovations to convert landfill gas into energy.
7 of the best green stocks to buy now:
— Beyond Meat Inc. (BYND)
— Ginkgo Bioworks Holdings Inc. (DNA)
— Amyris Inc. (AMRS)
— Local Bounti Corp. (LOCL)
— Plug Power Inc. (PLUG)
— Enphase Energy Inc. (ENPH)
— Republic Services Inc. (RSG)
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Update 04/13/22: This story was published at an earlier date and has been updated with new information.