This may be good news for investors who continue to focus on green companies, which can now offer bargains, after interest in green investments declined last year, along with renewable energy company stock prices.
A late 2023 survey by the Hoover Institution and Stanford University found that young and middle-aged adults say it is very important for fund managers to use their size and voting power to influence companies' environmental practices. It was shown that the proportion of investors is decreasing. In 2023, the percentages fell to 61% and 50%, respectively, from 79% and 66% the previous year.
The decline in support comes as inflation and rising interest rates hit the pockets of both investors and businesses. This is especially true for green energy companies, which are facing rising costs of borrowing and raw materials to build solar and wind power and other infrastructure to help decarbonize the economy.
But there is a silver lining for environmentally conscious investors who want to stay the course.
“After several years of intense demand, some investors have recently taken a pause on their exposure to green stocks,” said Sam Adams, CEO of Bart Asset Management. “This is a great buying opportunity because valuations are not pushed up that much.”
| stock | Performances since the beginning of the year until February 22nd |
| Vornado Realty Trust (ticker: VNO) | -9.6% |
| NextEra Energy Inc. (NEE) | -6.7% |
| Hannon Armstrong Sustainable Infrastructure Capital, Inc. (HASI) | -8.2% |
| Brookfield Renewable Corporation (BEPC) | -13.7% |
| First Solar Co., Ltd. (FSLR) | -16% |
| Sunrun Co., Ltd. (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 believes that green stocks will outperform stocks of companies that are less environmentally conscious over the long term.
“Companies that are more environmentally friendly are better prepared for the future, use less energy and water, and produce less waste,” he says. “As such, they have lower operating costs. They are also well-positioned to increase revenue. Their products and services is more attractive.”
Among those companies, he cited Vornado Inc., a real estate investment trust (REIT) that owns, manages and develops office and retail properties primarily in New York City. He also owns real estate in Chicago and San Francisco. The company says it has implemented green cleaning and energy efficiency policies across its portfolio.
Adams said REITs generally tend to outperform during periods of high interest rates. He says office REITs are oversold due to the work-from-home trend. Vornado's stock price has been depressed because of its high concentration of real estate, especially in Manhattan, he said.
Ariel Property Advisors said in a January report that Manhattan investment real estate sales in 2023 will decline by 45% from 2022 as investors worry about rising interest rates, increased expenses and the potential for expanded residential rent regulation. He said it had decreased.
“We would never consider excluding New York City, so we expect Vornado to bounce back,” Adams said. “We believe there will continue to be demand for distinctive offices downtown with green certification. These are the buildings that companies want as their headquarters and where they meet with clients.”
NextEra Energy Inc. (NEE)
This renewable energy company is a leader in solar and wind power and is consistently cited as a top green stock by investment experts.
The regulated utilities sector is primarily engaged in the generation, transmission, distribution, and sale of electrical energy in the State of Florida. Another segment generates electricity from renewable resources such as wind and solar. The company is involved in green hydrogen, storage batteries and nuclear power plants.
“NextEra Energy Resources has had a record year for new renewable energy and storage generation, with an order backlog of approximately “It's an increase of 9,000 megawatts.”
Hannon Armstrong Sustainable Infrastructure Capital, Inc. (HASI)
One of the big tailwinds for green stocks is the clean energy incentives included in the Inflation Control Act. HASI will benefit from this legislation as green investments increase.
The REIT says it is the first U.S. public company focused solely on investing to combat climate change. We provide capital to companies involved in energy efficiency, renewable energy and other sustainable infrastructure markets.
Its portfolio includes grid-connected wind, solar and energy storage projects, vehicle decarbonization and ecosystem restoration.
The company expects annual distributable earnings per share to increase by 8% to 10% compounded annually from 2024 to 2026, compared to a 2023 baseline of $2.23 per share. It has said.
Brookfield Renewable Corporation (BEPC)
Those who are attracted to the diversity of HASI's investments may also want to consider Brookfield, a renewable energy development company involved in hydro, wind, solar, distributed energy, and sustainable solutions.
Peter Krull, director of sustainable investing at Earth Equity Advisors, points out that 2023 will see record growth of nearly 5,000 megawatts of new clean generation capacity. He said the company's development pipeline in the United States should benefit from the clean energy provisions of the Inflation Control Act.
“2023 was a record year for our business by nearly every metric,” Brookfield Renewable CEO Conor Teskey said in a statement accompanying fourth-quarter and full-year results this month. Ta. “We achieved these results in an environment where interest rates are rising and supply chains are facing challenges.”
First Solar's stock price has fallen about 11% over the past year, but has risen about 170% over the past five years as solar power installations have become more popular in the United States.
The Solar Energy Industries Association (SEIA) and Wood Mackenzie announced in December that the U.S. solar industry is expected to add a record 33 gigawatts of solar capacity last year alone.
“Solar continues to be the fastest growing energy source in the United States, despite a challenging economic environment,” SEIA CEO Abigail Ross Hopper said in a statement accompanying the report. We expect this growth to continue over the next few years.”
Krull likes First Solar, a leading designer and manufacturer of solar panels and systems for utility-scale developments.
“The company is well positioned to take advantage of the clean energy provisions of the Inflation Control Act because of its manufacturing presence in the United States,” Krull said. “The company is investing in clean manufacturing and improving cell efficiency, and is focused on innovation in solar manufacturing.”
Sunrun, which offers solar panels and batteries for purchase or lease, has fallen about 47% over the past year. However, it has decreased by about 19% over the past five years.
Jefferies analysts recently initiated coverage on the company with a buy rating and a $25 price target. According to TipRanks, over the past three months, 16 analysts have given his average 12-month target price for the stock at $21.13. The closing price on February 22nd was $12.78.
SPDR S&P Kensho Clean Power ETF (CNRG)
If you want to diversify your clean energy holdings across multiple solar companies, consider this ETF, which includes Sunrun among its top stocks. It also owns Enphase Energy Inc. (ENPH), which designs, develops, manufactures and sells microinverter systems for the photovoltaic industry.
In addition to pure solar companies, the fund also owns green hydrogen company Fuel Cell Energy (FCEL) and General Electric Co. (GE), which is involved in wind, hydro and solar power.
According to fund documents, CNRG uses artificial intelligence and quantitative weighting techniques to create an index that identifies companies that are “driving innovation in the clean energy sector, including the solar, wind, geothermal, and hydroelectric sectors.” I'm tracking.
The fund is down about 27% over the past year, but is up about 80% over the past five years.
iShares MSCI KLD 400 Social ETF (DSI)
Susan HayesCulleton, managing director at VectorVest Europe, said the recent performance was particularly disappointing because there was so much promise built into the theme of green stocks. So she advocated for a different approach to green investing, moving from a strict definition of green stocks to include companies that are making strides toward better environmental, social, and governance (ESG) practices.
“There is now enough consumer pressure and ESG funding to push every company in the world to think more sustainably. Broaden your thinking to determining kindness,” Hayes-Culleton said.
He points to the iShares MSCI KLD 400 Social ETF. The ETF holds a broad range of large-, mid- and small-cap U.S. stocks and tracks an index that applies “sustainable screens” to fossil fuel extraction, ownership of fossil fuel reserves, and thermal power generation. There is. , among other non-environmental activities.
One problem is that Tesla Inc. (TSLA) is the only company in the fund's top 10 holdings that could be considered a pure green stock, which could turn off hardcore green investors. But the rest, including tech giants Microsoft Corp. (MSFT) and Alphabet Inc. (GOOG, GOOGL), have also made strides in ESG development in recent years.
This widespread adoption of ESG investing has paid off, with the ETF up about 29% over the past year, making it the only investment on this list to post a positive year-to-date return.
