There’s definitely a feeling that the world’s big players are throwing everything, including the kitchen sink, into tacking the climate crisis. With such huge vast amounts of money pouring into the sector – from governments and big corporations, there is potential for those firms who get it right to make significant returns for their shareholders.
YOUR CAPITAL IS AT RISK
Using fundamental analysis can help identify the firms that have a competitive edge. The below list of the 5 best climate tech stocks for 2022 offers a fast-track route into profiting from one of the hottest sectors in the market today.
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Climate Tech Stocks 2022
The catch-all term Climate Tech Stocks is used to identify firms with the potential to capitalise on the shift towards cleaner greener energy production and use. Any definition of the sector has fuzzy edges and includes, but is not limited to, renewable energy stocks, electric vehicle (EV) firms, EV charging stocks and climate tech companies.
Even major corporations that might not be thought of as out-and-out climate tech stocks are still doing their bit, as outlined by the CSR policies of Nike and Coca Cola. This does sometimes lead to charges of ‘’greenwashing’, where legacy operators try to do just enough to not fall out of favour with investors and consumers. The below stocks offer an alternative approach. They give investors the opportunity to say ‘hand on heart’ they invested in the firms best positioned to bring about climate change.
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Brookfield Renewable (BEPC)
Source: 123rf.com
One firm that offers exposure to a wide range of clean energy sectors is Brookfield Renewable. It is an industry leader in solar, wind, and hydroelectric electricity generation and has a growing carbon capture division. Its mandate extends to a lot of other areas ranging from urban design to container ports.
One of the neatest aspects of an investment in Brookfield is the ‘hedge fund style’ approach it offers. The firm is majority-owned by Brookfield Asset Management, which has the stated aim to “generate attractive long-term risk-adjusted returns for the benefit of our clients and shareholders” (source: Brookfield). Small investors can buy Brookfield stock and take comfort from knowing they will be investing in the same projects as professional investors and high-net-worth individuals. That doesn’t necessarily guarantee positive returns but could suit those with long-term buy-and-hold investment strategies.
First Solar Inc (FSLR)
Source: 123rf.com
According to the International Energy Agency, 60% of global renewable energy is attributed to solar and one of the primary candidates in that sector is First Solar Inc. The firm has been operating for more than 30 years and now has a +$7bn market cap, which means it has the critical mass to invest in projects in what is a booming sector.
The management team have recently reviewed operations and put through a range of cost-cutting exercises, which should help the trading bottom line and result in cash being returned to investors in the form of dividends or stock buy-backs.
SDIC Power Holdings (SDIC)
Source: 123rf.com
With the shift to clean energy being a global one, investing in the booming Asian markets could generate long-term gains. SDIC Power Holdings is a China-based firm, which is listed on the London Stock Exchange. It is an industry leader in terms of the construction, operation, and management of cutting-edge green energy projects and, due to the location of its core markets, offers a degree of portfolio diversification.
A market cap of approximately £122bn, combined with a move into consultancy, environment protection, and hi-tech energy products, suggest the firm is positioning itself to be able to pick up on the next big thing.
Tesla (TSLA)
Source: 123rf.com
The surge in the Tesla Motors Inc stock price through 2020–21 has been followed in 2022 by a pull-back and an opportunity for anyone experiencing FOMO to get on board. Elon Musk’s EV manufacturer still boasts super-strong global brand recognition and first-adopter advantage, just at new lower price entry levels.
Tesla Share Price
Source: IG
The global EV market is forecast to grow from around $290bn in 2021 to $1,320bn by 2028 and Tesla is still very much the undisputed leader in the sector. One of the potential trip-hazards for Tesla has been the question of whether it can produce enough vehicles to keep up with demand, but the new ‘gigafactories’ being built in Germany and Texas are due to come online soon.
In the space of five years, the TSLA stock price rallied by 2,000% and more gains could be on the cards thanks to innovation being part of Tesla’s DNA. The German plant is quoted by Musk as having the potential to produce vehicles three times faster than the factories of domestic competitors.
Aker ASA (AKER)
With the Norway government on track to invest $28bn per year in renewable technology, Aker ASA looks well-positioned to develop a strong base from which to reach out into international markets. The firm offers exposure to a wide range of cutting-edge technologies and is particularly strong in the carbon capture sector. The blend of solid and speculative projects has found favour with investors and resulted in the share price rising almost fourfold in value between February 2020 and October 2021.
BEST BROKERS TO BUY ETHICAL STOCKS:
Climate tech stocks offer incredible potential. They are at the riskier end of the investment spectrum due to revenue streams being reliant on new inventions coming good and government subsidies holding up but for many investors, that is part of their appeal.
If you’re ready to add some climate tech stocks to your portfolio, then it’s easy to do so using an online broker. These platforms have revolutionised the investment experience. Improved functionality and lower costs combine to make buying clean energy stocks a straightforward process and the brokers included in this list of trusted brokers are all regulated by financial authorities.
The Benefits of Buying Climate Tech Stocks
1. Helping the Environment
Taking the decision to buy climate technology stocks supports the stock price of a company and that helps the management invest in the projects required to move the global economy from being carbon-reliant. It also sends a signal that investors, as well as consumers, are supporting the move to a better way of doing things.
2. Investment Returns
Early days climate tech investors did have to factor in that financial reward might need to be a secondary concern to the aim of achieving social and environmental change – that is now far from the case. Identifying trends and investing in the same direction is one of the fundamentals of maximising profits and the wall of cash moving into the sector points to short, medium and long-term growth. Government subsidies look set to be scaled back at some point in the future, but institutional investors such as pension funds are following mandates which require them to take sizeable positions in climate change stocks.
Start Trading Climate tech Stocks Now
The increased interest in the climate tech sector in 2022 has resulted in more brokers offering their clients a chance to trade the sector. Brokers you might want to consider using include eToro, DEGIRO, and IG. These three are well-regulated and provide traders with the tools required to be successful. The platforms offer cost-effective trading whether you are looking to trade speculative short-term strategies or invest for the long haul.
If you’re interested in buying clean energy stocks but are not sure about the process involved, then this guide on how to buy Tesla shares offers a detailed breakdown of how things work. Alternatively, it might be worth considering one group of instruments, which is popular among beginners, Exchange Traded Funds (ETFs). These are a convenient way to buy a basket of different climate tech stocks with the click of one button. That spreads risk and is intended to smooth out returns. This guide to the best sustainable ETFs for 2022 expands on that approach further.
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FAQs
Any firm operating in the solar, hydro, tidal, EV or carbon capture sectors is going to have pretty strong eco-credentials. Using fundamental analysis can help establish if a climate tech stock is a buy or a sell and technical analysis can help you find the best time to enter the market.
Increased investor interest in the sector has resulted in trusted brokers expanding the number of markets they offer to their clients. Setting up an account at an online broker is super easy to do and takes a matter of minutes. From there, it’s just a case of navigating through the site to where your target investment is located, entering the quantity of stocks you want to buy and clicking or tapping buy.
Climate stock prices are associated with higher than average price volatility levels. Short-term speculators and day traders are active in the markets and can drive price up, or down by a significant amount in a short space of time. Investors with a longer-term investment strategy will be taking a view on to what extent climate stocks are going to become the ‘new normal’.
