The world is turning into “clean” energy. What stocks will benefit from this :: News :: RBC Investments

Many companies are now striving to meet ESG standards. But there are companies whose environmental friendliness is undoubted – from the field of alternative energy. Here are 3 promising stocks of ESG from the environmental sector

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Green energy is a trend, no matter how oil, gas and coal proponents like it. And this sector is only entering the main stage of development, which means that now is the best time for long-term investment in the industry.

On October 14, RBC will host the ESG-(P) Evolution Conference. It will be attended by heads of major Russian and world companies, as well as heads of departments responsible for the ESG agenda. This event will be the first major forum on ESG in Russia. To participate in it, follow the link.

ESG standards are beginning to play an increasingly important role in the investment world. Large global companies are changing their strategies in favor of social responsibility policies, and more and more investors are choosing only those assets that meet ESG criteria.

Investing in ESG It is a form of socially responsible investment, when the decision to invest in a business is made on the basis of the company’s contribution to the development of society. The positive impact of the company can be assessed in terms of three main factors:

  • Environmental (e) – concern for the environment.
  • Social (S) – Supporting social justice.
  • Governance (G) – fair management of the company.

European banks have already begun to refuse loans to customers whose business may involve climate risks. Whole parts become unwanted. At the same time, clients’ capital requirements are fading into the background for banks. All of this is happening due to increased pressure on the financial industry from regulators and investors, who aim to support low-carbon sectors.

ESG investments are taking over the world. What is it and why are they getting popular?

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In August, the US Senate passed a $1.2 trillion infrastructure plan that provides financing for various sectors of the economy to convert to clean energy. In Russia, the Ministry of Economy has prepared a low-carbon development strategy – by 2050, the country’s greenhouse gas emissions should be reduced by 79%, and carbon neutrality (net of carbon dioxide emissions) can be achieved by 2060.

Renewable energy capacity has grown at an average rate of about 8% annually over the past ten years. We have chosen environmental stocks that will benefit from more decarbonization in the global economy.

SolarEdge develops optimized inverter systems that are needed to increase the efficiency of solar panels. This technology helps reduce the cost of solar energy. In 2014, the company ranked 10th among the largest suppliers of solar inverters, and in 2020 it became the leader in this sector.

Energy “RusHydro” green certificates will appear on the Commodity Exchange

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SolarEdge outperforms the competition by producing low-cost power optimizers. A strong balance sheet allows the company to invest in new projects in the green energy market, including storage, charging, batteries for electric vehicles and other areas. With this, SolarEdge is expanding its presence in the fast-growing clean energy sector.

According to the results of the second quarter of the year, the company’s results exceeded analysts’ expectations. Adjusted earnings per share for the second quarter were $1.28, compared to expectations of $1.12. Year-over-year revenue increased 44.7% to $480.1 million, and gross profit – increased 51.6% to $156.2 million.

BMO Capital analyst Amit Thakkar gave SolarEdge Technologies an “Outstanding” rating and a price target of $357. The analyst notes that the company’s core product is becoming an increasingly important part of the rapidly growing solar market.

Xcel Energy is an energy company that owns hydro, coal, gas, wind, solar and nuclear power plants. Also, Xcel Energy plants operate on biomass – pruning of wood, litter and agricultural residues. Alternative energy sources make up 47% of the electricity generated by the company.

By 2050, Xcel Energy aims to produce 100% carbon-neutral electricity. The holding company plans to spend $24.3 billion on capital projects through 2025, including the direction of new renewables. In particular, the company is evaluating the possibility of using hydrogen as a fuel in stations.

Until 2025, Xcel Energy expects earnings per share to grow 5-7% annually, and plans to increase its dividend by the same level.

Gazprom Neft and Aeroflot make Russia’s first environmentally friendly fuel

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Xcel Energy’s Q2 headline numbers came in better than expected. Earnings per share were $0.58 compared to expectations of $0.54, third-quarter revenue increased 18.6 percent to $3 billion, and operating income rose 3.8 percent year-over-year to $438 million.

Eric Beaumont, an analyst at Barclays, has raised his price target for Xcel Energy’s stock to $76 and rated it as an outperformer. In his opinion, the growth factors for the company will be the broad geography of the business and the transition to renewable energy sources.

First Solar develops and manufactures thin-film solar panels. By 2025, its production capacity is expected to double from 2020. First Solar’s balance sheet is one of the best in the segment. For 2021, the company’s cash flow is approximately $1.5 billion, giving the company the financial flexibility to invest in expanding production.

Adjusted earnings per share for the second quarter of 2021 beat analysts’ expectations by 28.3% to $0.77. On an annual basis, the number is up 120%.

Photo: shutterstock

Photo: shutterstock

Susquehanna analyst Bijou Perincheril upgraded the stock from neutral to positive and raised the price target to $120 from $89.

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