If you want to invest in companies that are both profitable and healthy for the planet, you should look no further than green stocks. These are companies that lead the charge in sustainable practices, from renewable energy and clean technology to ethical sourcing and responsible corporate governance.
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Ethical and green stocks come in many forms. Their different profiles mean that some offer higher risk-return than others, and some offer a degree of stability. The below five stocks selected by AskTraders not only tick the box in terms of providing potential returns with an ethical twist but would also complement each other if held in the same portfolio. Read on as we consider the top stocks to boost your portfolio's eco-friendly and ethical status.
|$2.71bn (year ended 30/09/23)
|$7.72bn (YE 30/09/23)
|$5.35bn (YE 30/09/23)
|Brookfield Renewable Partners
|$5.14bn (YE 30/09/23)
How We Chose These Stocks
The companies listed above were chosen as our top environmentally friendly and ethical stocks primarily due to the fact they lead the way when it comes to green policies, products, and services. The companies contribute to promoting responsible resource utilisation, and creating a healthier planet. However, investing in ethical and green stocks should also come with the potential for profit, and each company has a solid financial performance, bringing in strong revenues.
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Enphase Energy Inc. (ENPH)
This California-based green energy company was founded in 2006 and produces solar microinverters for residential and commercial properties. The company’s green credentials are illustrated by its offering of best-in-class energy management solutions, including solar generation, battery storage, electric vehicle (EV) charging, smart load control, and cloud-based monitoring and control.
Enphase has installed more than 48 million microinverters on over 2.5 million homes in over 140 countries. It has more than 2,500 staff based across the world. The total amount of CO2 the firm offsets is equivalent to that used by 3.5 million homes in one year.
|Ethical credentials: The firm’s aim of providing clean, affordable, and reliable energy is backed up by its approach to providing good jobs.
|Solar demand: While demand for solar over the last few years has been strong, it has recently eased, with Enphase warning that the appetite has been impacted by “macroeconomic conditions.” This could be temporary, so it’s essential to keep up to date with industry news.
|Employee training: The Enphase Learning Academy offers training programmes to existing employees. Upskilling staff is a main priority, with the firm offering talks on niche technical topics, wellness and work-life balance webinars, and management development modules.
You might not expect a timber real estate investment trust to be on this list. After all, Weyerhaeuser’s core business involves felling trees for the lumber it uses in construction. However, this company practices sustainable forestry and has planted over one billion trees over the last decade while also maintaining a commitment to responsible development and clean energy.
|Governance: The company performs well on good governance principles. In 2021, the firm appointed a Director with a sole focus on stakeholder engagement, diversity, and inclusion in the workforce.
|Lumber pricing: The WY business is significantly impacted by lumber demand and pricing. Therefore, any volatility in lumber pricing may affect the share price movement, which is a factor to watch out for.
|Track record: The targets WY sets in terms of sustainability take the form of a 10-year roadmap, which is adjusted annually. Despite stringent targets, the firm has a track record of meeting them. Its 2021 ESG report confirms it exceeded the original greenhouse gas reduction target by reducing its emissions by 57% compared to levels in the year 2000.
|Profits and sustainability: Weyerhaeuser represents an opportunity to tap into ecologically aware investing and smooth out portfolio returns.
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Clean Harbors (CLH)
This company is not only dedicated to social responsibility within its core operations but is also the organisation frequently called in to clean up other organisation’s messes. Emergency spill response and end-to-end hazardous waste management are two services it offers. Founded in 1980, Clean Harbors has a market cap of more than $8 billion and is one of the highest-profile firms in its sector. Its client base is primarily made up of Fortune 500 companies, and its track record dates back to its role in leading the clean-up effort after events such as the Deepwater Horizon explosion and the Gulf of Mexico Oil Spill of 2010.
This Massachusetts-based company operates throughout the US, Canada, Mexico, and Puerto Rico. Operating through its subsidiary, Safety-Kleen, Clean Harbors is also North America's largest re-refiner and recycler of used oil.
|Sustainability: The company has a comprehensive sustainability program revolving around energy usage, health and safety, customer solutions, and engagement.
|Insider selling: One concern for shareholders may be the recent news of founder Alan McKim selling a substantial amount of shares. While the amount was small regarding his overall holding, it is something to consider. In addition, it was reported that Snyder Capital Management also recently trimmed its stake in the company.
|Client base: As mentioned, Clean Harbors has customers in the Fortune 500 category. However, it also has midsize and small clients that are public and private entities. Its diversified client base provides it with stable recurring sources of revenue.
|Scalability: The opportunity for Clean Harbors investors is all about scalability. The services the firm offers are increasingly in demand as the world’s big corporations turn green.
Brookfield Renewable Partners (BEP)
Brookfield is a US-based renewable energy company with a global presence. Its focus, as the name implies, is on clean, green, renewable energy sources, and each year, it is responsible for 11 million metric tonnes of emissions being avoided. Brookfield has diversified its energy sources with hydroelectric dams (making up around 75% of its generating capacity), wind power (20% of capacity), and solar power (the remaining 5%).
The company is one of the largest investors in renewable energy worldwide, with over 31,000 megawatts of generating capacity – 7,830 megawatts of that capacity being US-based. The company owns 940 power-generating facilities worldwide, including 219 hydroelectric facilities.
|Diversified: Unlike many other clean energy firms, Brookfield has diversified its energy sources, reducing its potential risk. In addition, it is in a position not only to generate clean energy but also to solve the challenge facing renewables by doing so on a 24/7 basis.
|Increasing competition: While BEP is a leader in its sector, competition is fierce and becoming fiercer as governments globally continue to push green policies. Competition is not a significant headwind, but it is always something to be aware of in a rapidly rising industry.
|CSR commitment: Brookfield’s commitment to corporate social responsibility goes beyond its core business activities as well. It has a strong focus on employee well-being, health & safety, community engagement, philanthropy, transparency, and ethical governance.
|Dividend yield: BEP boasts a generous dividend yield. This translates to a steady stream of income for investors, particularly appealing to income-seeking individuals and retirees.
Bloom Energy (BE)
San Jose-based renewable energy firm, Bloom Energy, delivers reliable, clean, sustainable electricity to organisations worldwide. The firm was founded in 1960 by Jim McElroy, who was working on developing hydrogen fuel cells for NASA’s Gemini project, and links to ground-breaking technologies have been maintained ever since.
The company develops, produces, and installs Bloom Energy Servers. These are power generators that use fuels from biological sources such as methane – a gas produced as a by-product of various types of waste – but recycled by Bloom into a usable energy source. Bloom servers let organisations customise energy solutions to reduce their carbon footprint and meet sustainability goals.
|Green benefits: As well as reducing carbon emissions, its technology facilitates reduced water consumption and results in lower levels of air pollution.
|A long-term hold: Buyers of Bloom Energy would do well to apply some patience to their strategy to optimise trade entry points. It’s a high-risk-return proposition, but the stock offers investors the chance to make a significant financial return while investing in a green stock with an ethical edge.
|Well-managed: Bloom is a well-run and long-established company that has a track record of being able to monetise its research and development projects. It also continues to be attractively cutting-edge in its approach.
How to Invest in the Environmentally Friendly and Green Stocks
If you are ready to add some ethical stocks to your portfolio, you'll need a brokerage account. Ensure it is regulated, has low fees, and is a user-friendly platform. Finding one can be a daunting task, so we've selected some of our favourites that tick all of these boxes to help you get started.
Best Brokers to buy Ethical Stocks:
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If you are ready to add some ethical stocks to your portfolio you'll need a broker that is regulated, has low fees and a user-friendly platform. Finding one can be a daunting task, which is why we've selected some of our favourites that tick all of these boxes to help you get started.
Why Invest in Environmentally Friendly Stocks
Green stocks and ethical investments might take some time to realise their full potential. Some of the firms are engaged in projects that involve restructuring entire infrastructure networks or investing in long-term research projects.
However, given the long-term potential of the sector and the investment and effort being made to push environmentally friendly policies worldwide, investing in these types of stocks means you are putting cash into a sector with strong growth potential. Consumer sentiment has also moved, which means demand for cleaner energy should continue to grow. The long-term potential of environmentally friendly stocks means they are best suited for buy-and-hold investors who have a longer investment timeframe.
What to Know Before Investing in Ethical Stocks
Selecting the best green stock is made more difficult by the fact that big and small corporations around the world are getting on board with the ethical investment program. That means investment decisions need to factor in the relative appeal of new start-up operations compared to established firms, which are embracing the need for change.
Ethical investing can be risky: Investing in green stocks does involve something of a ‘feel good’ element. But as with all investments, any decision needs to factor in likely risk-return, and there are reasons why ethical investing might be a bumpy ride at times.
Financial performance: Don't neglect traditional financial analysis. Make sure to research companies with solid financials, strong growth potential, and competitive advantages.
Government subsidies and tax incentives: The main threat to the sector is that government subsidies and tax incentives that are being used to prime the sector will, over time, be phased out. Assess how that will impact the financials of the company you are researching.
Macroeconomic factors: There are also macro factors such as recessions, inflation, and energy prices that can throw off even the best-made plans, and investors should assess the current economic climate before parting with their hard-earned cash.
With all of the factors above in mind, our shortlist of environmentally friendly stocks and ethical investments has been created to include stocks with profiles that might smooth out returns and boost the environmental and ethical nature of your portfolio.