Interest in environmentally focused investing declined last year along with shares of renewable energy companies, but this may be good news for investors who remain committed to green companies that could now be bargains.
A late-2023 survey by the Hoover Institution and Stanford University showed a decline in the percentage of young and middle-aged investors who said it was extremely or very important for fund managers to use their size and voting power to influence the environmental practices of the companies they invest in. In 2023, that percentage fell to 61% and 50%, respectively, from 79% and 66% the year before.
The slipping support comes as inflation and higher interest rates hit the pockets of both investors and companies. That’s been especially true for green energy companies that face higher borrowing and raw materials costs to build solar and wind farms and other infrastructure to help decarbonize the economy.
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But there is a silver lining for environmentally conscious investors who want to stay the course.
“After a few years of torrid demand, some investors have recently hit pause on green stocks,” says Sam Adams, CEO of Vert Asset Management. “This is a great buying opportunity, as valuations aren’t being pushed as much.”
With that in mind, here’s a look at eight green stocks and exchange-traded funds, or ETFs, to consider:
| Stock | Year-to-date performance through Feb. 22 |
| Vornado Realty Trust (ticker: VNO) | -9.6% |
| NextEra Energy Inc. (NEE) | -6.7% |
| Hannon Armstrong Sustainable Infrastructure Capital Inc. (HASI) | -8.2% |
| Brookfield Renewable Corp. (BEPC) | -13.7% |
| First Solar Inc. (FSLR) | -16% |
| Sunrun Inc. (RUN) | -34.9% |
| SPDR S&P Kensho Clean Power ETF (CNRG) | -13.3% |
| iShares MSCI KLD 400 Social ETF (DSI) | 6.8% |
Vornado Realty Trust (VNO)
Adams thinks green stocks will outperform shares in companies with fewer environmental scruples over the long term.
“Greener companies are better prepared for the future — they use less energy and water and create less waste,” he says. “So they have lower operating costs. And they are well placed to increase revenue — their products and services are more attractive as both retail consumers and businesses increasingly seek climate-friendly solutions.”
Among those companies, he points to Vornado, a real estate investment trust, or REIT, that owns, manages, and develops office and retail properties primarily in New York City. It also holds properties in Chicago and San Francisco. The company says it has green cleaning and energy efficiency policies implemented across its portfolio.
Adams says that REITs in general tend to outperform during periods of high interest rates. Office REITs, he says, are oversold because of the work-from-home trend. Vornado’s shares in particular have been beaten down because of its concentration of properties in Manhattan, he says.
Investment property sales in Manhattan during 2023 fell 45% from 2022 as investors were concerned about higher interest rates, rising expenses and the potential expansion of residential rent regulation, Ariel Property Advisors said in a January report.
“We wouldn’t ever count NYC out, so we see Vornado bouncing back,” Adams says. “We think there will still be demand for signature downtown offices that have green credentials. These are the buildings firms want as their headquarters and where they meet with clients.”
NextEra Energy Inc. (NEE)
This renewables powerhouse is a leader in solar and wind electricity generation and is continually mentioned as a top green stock by investing experts.
Its regulated utility segment engages primarily in the generation, transmission, distribution and sale of electric energy in Florida. Another segment produces electricity from renewable sources, including wind and solar. The company is involved with green hydrogen, battery storage and nuclear plants.
“NextEra Energy Resources had its best-ever year of new renewables and storage origination, adding approximately 9,000 megawatts to its backlog,” CEO John Ketchum said this month in a statement accompanying full-year and fourth-quarter financial results.
Hannon Armstrong Sustainable Infrastructure Capital Inc. (HASI)
One major tailwind for green stocks is the clean energy incentives included in the Inflation Reduction Act. HASI stands to benefit from the legislation as green investments ramp up.
This REIT says it is the first U.S. public company solely focused on climate-solution investments. It provides capital to companies involved in energy efficiency, renewable energy and other sustainable infrastructure markets.
Its portfolio includes grid-connected wind, solar and storage projects, fleet decarbonization, and ecological restoration.
The company says it expects annual distributable earnings per share to grow at a compounded annual rate of 8% to 10% from 2024 to 2026 relative to a 2023 baseline of $2.23 per share.
Brookfield Renewable Corp. (BEPC)
Those attracted to the diversity of HASI’s investments may also want to consider Brookfield, which is a renewable energy developer involved in hydro, wind, solar, distributed energy and sustainable solutions.
Peter Krull, director of sustainable investing at Earth Equity Advisors, points to record growth in 2023, with nearly 5,000 megawatts of new clean generation capacity. He says the company’s development pipeline in the U.S. should benefit from clean energy provisions in the Inflation Reduction Act.
“2023 was a record year for our business on almost all metrics,” Brookfield Renewable CEO Connor Teskey said this month in a statement accompanying fourth-quarter and annual results. “We delivered these results in a rising-rate environment and one where supply chains were facing challenges.”
First Solar Inc. (FSLR)
First Solar’s shares are down about 11% over the past year, but they’re up around 170% over the past five years as solar installations in the U.S. have become more popular.
Last year alone, the U.S. solar industry was expected to add a record 33 gigawatts of solar capacity, the Solar Energy Industries Association (SEIA) and Wood Mackenzie said in December.
“Solar remains the fastest-growing energy source in the United States, and despite a difficult economic environment, this growth is expected to continue for years to come,” SEIA CEO Abigail Ross Hopper said in a statement accompanying the report.
Krull likes First Solar, a leading designer and manufacturer of solar panels and systems for utility-scale developments.
“The company is positioned to take advantage of clean energy provisions in the Inflation Reduction Act because of its U.S. manufacturing base,” Krull says. “The company is focused on innovation in the solar manufacturing space as it invests in clean manufacturing and increased cell efficiency.”
Sunrun Inc. (RUN)
Sunrun, which provides solar panels and batteries for purchase or lease, is down about 47% over the past year. Over the past five years, though, it’s lost about 19%.
A Jeffries analyst recently initiated coverage with a “buy” rating on the stock, giving it a $25 price target. According to TipRanks, over the past three months, 16 analysts had an average 12-month price target on the stock of $21.13. It closed at $12.78 on Feb. 22.
SPDR S&P Kensho Clean Power ETF (CNRG)
If you’d like to diversify your clean energy holdings among several solar companies, you can consider this ETF, which has Sunrun among its top holdings. It also holds Enphase Energy Inc. (ENPH), which designs, develops, manufactures and sells microinverter systems for the solar photovoltaic industry.
Beyond pure-play solar companies, the fund holds green hydrogen company FuelCell Energy Inc. (FCEL) and General Electric Co. (GE), which is involved in wind, hydro and solar power.
According to fund literature, CNRG tracks an index that uses artificial intelligence and quantitative weighting methodology to identify companies that are “driving innovation behind the clean energy sector, which includes the areas of solar, wind, geothermal and hydroelectric power.”
The fund is down about 27% over the past year but has gained about 80% over the past five years.
iShares MSCI KLD 400 Social ETF (DSI)
There has been so much expectation built into the environmentally friendly stocks theme that recent performance has been especially disappointing, according to Susan HayesCulleton, managing director at VectorVest Europe. So, she makes the case for a different approach to green investing, moving from a strict definition of a green stock to include companies that are making strides toward better environmental, social and governance, or ESG, practices.
“There is enough consumer pressure and ESG dollars now pushing every single company in the world to think more sustainably, so expand your mindset into considering the broader market and determining how green it is,” says HayesCulleton.
She points to the iShares MSCI KLD 400 Social ETF, which holds a range of large-, mid- and small-cap U.S. stocks and tracks an index that applies “sustainable screens” against fossil fuel extraction, fossil fuel reserves ownership and thermal coal power, among other non-green activities.
One catch is that Tesla Inc. (TSLA) is the only company in the fund’s top 10 holdings that might be considered a pure-play green stock, which might turn off die-hard green investors. But the rest, including tech giants Microsoft Corp. (MSFT) and Alphabet Inc. (GOOG, GOOGL), have made progress in their ESG development in recent years.
This broader application of ESG investing has paid off, as the ETF has risen about 29% over the past year and is the only investment on this list with a positive return year to date.
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8 Best Green Stocks and ETFs to Buy for 2024 originally appeared on usnews.com
Update 02/23/24: This story was published at an earlier date and has been updated with new information.
