Clean Energy: The Future of Humanity

Climate change is an essential topic as it will play a significant role in the future of humanity. While there are climate change deniers on one side and those that predict the end of the world on the other side, there is no denying the fact that humans and our current lifestyles play a significant role in altering the climate and causing irreplaceable damage to the environment. With this fact in mind, it is helpful to look at some of the effects that are plain in sight. Glaciers are melting at an accelerated rate, and this can potentially cause devastating floods and long-lasting drought eventually. Ocean levels are rising, threatening the existence of many coastal cities and island communities. Vehicular pollution is causing severe damage to air quality in major metropolitan areas across the world.

According to data from the National Oceanic and Atmospheric Administration (climate.gov), the ten warmest years on record have occurred after 2005, and 2020 was the second-warmest year record based.

The UN Climate Change Conference, more popularly known as COP26, concluded recently, and several new commitments towards addressing climate change were made. These include measures on controlling deforestation, reducing coal usage, decreasing methane, and specific targets at achieving net-zero emissions set by major countries, including Japan and India.

While the measures aim to make the world a better place to live, these also have an enormous impact on investment returns. Let’s look at some of the major beneficiaries:

Clean energy – power generation and transmission

For clean energy and reducing emissions, many developed countries announced measures during the COP26 summit. They include much lower emissions levels by 2030, $100 billion in climate financing per year, and increased collaboration between the major nations to tackle the challenges that impact climate change.

Some of the key players in the renewable energy market in the US are:

First Solar is a manufacturer of solar panels and provides other services such as financing, construction, maintenance, and recycling of solar-powered generation systems. The firm had over $3.0 billion in 2020 revenues.

One of the largest energy companies in the US, Chevron has announced an aggressive measure to transition to a cleaner energy company, including over $10 billion in funds to lower emissions in its operations.

This Florida-based electric utility has been one of the early movers into the renewable space. It has both wind and solar-powered generation capacity.

Source: Morningstar

Clean energy – Electric vehicles & batteries

Transportation companies that develop electric vehicles are perhaps the largest beneficiaries of the move to cut emissions. EV is also one area where a large amount of R&D is happening. There are over 40 companies that make electric vehicles, including start-ups. These include recent IPOs like Rivian, Lucid Motors, and NIO. Many traditional auto-manufacturers have increasingly moved to the EV space. Players such as Toyota Motors and Ford are aspiring to become EV giants. The space also includes operators of charging stations, such as ChargePoint, Blink, and Xpeng. The most prominent players in this space are:

Most popular among electric vehicles, it is the largest automobile company in the world by market cap. The firm is expected to surpass 2 million vehicles in sales by 2023. Tesla also provides a wide network of charging stations.

General Motors, one of the oldest auto manufacturers in the US, has ambitious plans in the EV space. The firm plans to roll out over 30 EV models by 2025 and shift to an all-electric only line-up by 2035.

Based out of Charlotte, NC, this chemical company is a major player in the lithium market. In fact, it is the largest provider of Lithium to the EV battery market. The firm has recently expanded its production capacity to meet the growing demand for the key component.

Source: Morningstar

Environment:

Companies involved in clean environment operations are also poised to benefit from measures such as water conservation, air quality monitoring, environment-friendly packaging, and sustainable farming. Some of the major players in this space include:

Pentair is a US company involved in the water treatment business. The firm provides its services to municipalities and to the agriculture sector. Pentair also provides measures to improve water conservation across its customer base.

Danaher is an industrial conglomerate with a growing business in clean packaging and instrumentation for water. The firm provides measuring equipment for testing water in reservoirs, wastewater treatment plants, and rivers and streams. Danaher also provides purification solutions.

Despite operating in the lumber industry, Weyerhaeuser has been a key player in reforestation. A core component of this firm’s sustainability strategy involves fully sustainability into day-to-day work and focusing on critical challenges such as climate change solutions, sustainable homes, and rural communities.

Source: Morningstar

Investment options:

A wide variety of investment options are available in the clean energy space with a large list of individual stocks to choose from. A variety of ETFs are also available. Some of these include Global X Lithium & Battery Tech ETF (LIT), ARK Autonomous Technology & Robotics ETF (ARKQ), iShares Global Clean Energy ETF (ICLN), Invesco WilderHill Clean Energy ETF (PBW), Invesco Water Resources ETF (PHO), and Invesco Solar ETF (TAN).

Source: Morningstar

Globalise also offers a curated portfolio in the form of the Clean Energy Globe, a basket of investments that offer exposure to the clean energy and environment space.