In this article, we discuss the 11 best climate change stocks to buy according to hedge funds. If you want to skip our discussion on the recent climate change developments, go directly to the 5 Best Climate Change Stocks To Buy According To Hedge Funds.
In recent times, there has been a shift in focus away from the use of fossil fuels and towards renewable or green energy to counter some of the negative impacts of climate change. According to a leading Zurich-based insurance provider Swiss Re, the global economy could see its output fall by 11% to 14% by 2050 due to the impact of climate change. In monetary terms, it could shrink the global economy by as much as $23 trillion. Such a drastic change would surely impact all the financial markets, including the equity markets. This has brought up the environmental, social, and governance (ESG) criteria as an integral factor in the investing world nowadays. Previously, investors were not too interested in the environmental footprint of an organization, but the transition is underway as governments across the globe have started to allocate funds toward climate change. For instance, the state of California intends to transition completely from gasoline cars to electric vehicles (EVs) by 2035. Furthermore, renewable energy is a key component of the recent Inflation Reduction Act (IRA) introduced by the Biden administration. The act provides a multi-year growth path to support renewable energy organizations. Meanwhile, the European Union (EU) intends to lower its greenhouse gas emission by 55% as compared to the levels in 1990. As of 2020, the EU has already slashed its greenhouse gas emissions by 34% compared to the 1990 levels.
Numerous non-governmental organizations (NGOs) and hedge funds are actively working on making climate change a part of the corporate conversation. An example was the involvement of activist hedge fund Engine No.1 in winning seats on the Board of integrated energy giant Exxon Mobil Corporation (NYSE:XOM) in May 2021 after a shareholders’ vote. These members took on the challenge of changing the view of the company’s leadership on climate change and making Exxon Mobil Corporation (NYSE:XOM) increase its efforts to lower greenhouse gas emissions. This development reflected that corporations are unable to address investor concerns related to climate change and require intervention in the form of activist investors. Before the vote, Exxon Mobil Corporation (NYSE:XOM) had requested the shareholders not to vote for the candidates selected by the activist hedge fund as they claimed that they were already doing enough to lower their carbon footprint. The hedge fund had a stake of only $50 million in the behemoth company with a market capitalization of over $250 billion at that time.
Experts believe that Exxon Mobil Corporation (NYSE:XOM) has been behind other integrated energy companies in its response related to climate change as it is anticipating further growth in the demand for crude oil and natural gas. Hence, the company is doubling down on this anticipated demand by increasing its capital expenditure to increase output. Meanwhile, other energy giants have lowered their investments in conventional energy sources. Companies like Tesla, Inc. (NASDAQ:TSLA), Shell plc (NYSE:SHEL), and Enphase Energy, Inc. (NASDAQ:ENPH) are among the firms actively working toward reducing their carbon footprint, making them some of the best climate change stocks to buy, according to hedge funds.
Photo by Jason Blackeye on Unsplash
Our Methodology
We picked some of the most popular climate change stocks among the 895 hedge funds tracked by Insider Monkey as of the end of the second quarter. These companies are operating in the green energy sector, providing alternative energy sources and climate-friendly solutions to the growing energy demand.
Best Climate Change Stocks To Buy According To Hedge Funds
11. Canadian Solar Inc. (NASDAQ:CSIQ)
Number of Hedge Fund Holders: 13
Canadian Solar Inc. (NASDAQ:CSIQ) is a Guelph, Canada-based manufacturer of solar photovoltaic (PV) modules and operates large-scale solar projects. The company has the distinction of having 20 manufacturing facilities and serves customers in over 160 countries.
Canadian Solar Inc. (NASDAQ:CSIQ) is aggressively working on expanding its production capacity with a project pipeline of 31-gigawatt hours (GWh) as of 2022. The company has already delivered 75 GW of solar modules across the world, which is enough to fulfill the clean energy demand of 17.7 million households. Canadian Solar Inc. (NASDAQ:CSIQ) is performing financially well as it outperformed Q2 2022 revenue and EPS estimates. The company also provided higher-than-expected guidance for Q3 2022 and the full year 2022. The demand for solar installations compounded by an average rate of 33% annually in the last decade and has reached 121 GW as of 2022.
At the end of the second quarter of 2022, 13 hedge funds reported owning a stake in Canadian Solar Inc. (NASDAQ:CSIQ).
10. ChargePoint Holdings, Inc. (NYSE:CHPT)
Number of Hedge Fund Holders: 17
ChargePoint Holdings, Inc. (NYSE:CHPT) is a Campbell, California-based operator of the biggest EV charging network globally. The company has charging stations situated at 163,000 locations across 14 countries in Europe and North America.
ChargePoint Holdings, Inc. (NYSE:CHPT) has a market share of over 70% in the fast-charging segment, which is seven times more than the second-placed competitor in the industry. ChargePoint Holdings, Inc. (NYSE:CHPT) is also involved in selling charging hardware to organizations that have charging stations. Analysts also have a positive outlook on ChargePoint Holdings, Inc. (NYSE:CHPT) stock as Maheep Mandloi at Credit Suisse initiated coverage on the stock with an Outperform rating along with a target price of $22 in a research note issued to investors on September 7. The analyst believes that ChargePoint Holdings, Inc. (NYSE:CHPT) will be benefitted from the first-mover advantage, integrated solutions, and less capital-intensive growth model.
As of Q2 2022, ChargePoint Holdings, Inc. (NYSE:CHPT) was held by 17 hedge funds.
9. Brookfield Renewable Partners L.P. (NYSE:BEP)
Number of Hedge Fund Holders: 19
Brookfield Renewable Partners L.P. (NYSE:BEP) is a Bermuda-based pure-play renewable power platform with exposure to hydroelectric, solar, and wind energy storage facilities situated across Asia, the Americas, and Europe.
Brookfield Renewable Partners L.P. (NYSE:BEP) sells the power generated by its facilities to electric utility companies and corporate customers under long-term contracts. The total addressable market (TAM) of Brookfield Renewable Partners L.P. (NYSE:BEP) is increasing with every passing day as governments are working aggressively to achieve lower carbon emissions. The US is working on achieving 50% to 52% lower greenhouse gas emissions as compared to the level in 2005. Furthermore, the electricity demand in the US is expected to increase by 80% from the current level by 2050. Experts anticipate that 90% of the new electricity demand will be fulfilled by renewable sources.
ClearBridge Investments shared its outlook on Brookfield Renewable Partners L.P. (NYSE:BEP) in its Q1 2022 investor letter. Here’s what the firm said:
“Brookfield Renewable is a pure-play renewables operator and developer headquartered in Canada, focused on international hydro, solar, wind and storage technology. As more private and public institutions announce ambitious carbon reduction initiatives, Brookfield Renewable’s globally diversified, multi- technology renewables business makes it an attractive partner. Brookfield’s development pipeline stands at 18,000 MWs, providing confidence the company can meet its targeted double- digit cash flow growth through to 2025. The market narrative around the energy transition and energy security, along with increasing fossil fuels prices which have driven greater focus on switching to renewables, helped Brookfield shares in the quarter.”
Brookfield Renewable Partners L.P. (NYSE:BEP) is popular among hedge funds as one of the best climate change stocks. The stock was held by 19 hedge funds at the end of Q2 2022.
8. Stem, Inc. (NYSE:STEM)
Number of Hedge Fund Holders: 19
Stem, Inc. (NYSE:STEM) is a San Francisco, California-based provider of clean energy software solutions driven by artificial intelligence (AI) and machine learning.
Athena is the company’s most utilized distributed energy resources (DER) optimization solution that results in an energy saving of 10% to 30%. In a research note on September 7, Abhishek Sinha at Northland initiated coverage on Stem, Inc. (NYSE:STEM) stock with an Outperform rating and a target price of $24. The analyst thinks that Stem, Inc. (NYSE:STEM) is well positioned with a very dominant presence in the complete battery storage solutions segment. Sinha anticipates the IRA and enhancement in battery technologies to drive various industries to execute energy storage solutions. The analyst concluded that Stem, Inc. (NYSE:STEM) is way ahead of competitors as it has 50% bookings from repeat customers in its Q3 2022 bookings.
Electron Capital Partners raised its stake in Stem, Inc. (NYSE:STEM) by 326% during Q2 2022.
7. First Solar, Inc. (NASDAQ:FSLR)
Number of Hedge Fund Holders: 26
First Solar, Inc. (NASDAQ:FSLR) is a Tempe, Arizona-based manufacturer of solar modules that is taking an active part in combating climate change.
The company, founded in 1999, has one of the biggest solar manufacturing facilities in Ohio. It anticipates its third facility to come online by the start of next year and its fourth facility in the US Southeast by 2025. Following these developments, First Solar, Inc. (NASDAQ:FSLR) will have an annual manufacturing capacity of 20 GW. Furthermore, the company does not rely on Chinese components to manufacture its modules. First Solar, Inc.’s (NASDAQ:FSLR) strong growth plans merit its inclusion among the best climate change stocks to buy.
First Solar, Inc. (NASDAQ:FSLR) is expected to be one of the biggest beneficiaries of the IRA due to the tax credits received on solar manufacturing. This is a key factor driving the company’s rapid capacity expansion. In an update issued on September 9, Biju Perincheril at Susquehanna increased the price target on First Solar, Inc. (NASDAQ:FSLR) from $120 to $175 and reiterated a Positive rating.
6. Sunrun Inc. (NASDAQ:RUN)
Number of Hedge Fund Holders: 36
Sunrun Inc. (NASDAQ:RUN) is a San Francisco, California-based provider of battery storage and solar panels.
On August 18, Stephen Byrd at Morgan Stanley increased the price target on Sunrun Inc. (NASDAQ:RUN) from $70 to $79 and reiterated an Overweight rating on the stock. The analyst made the upward revision in target price to incorporate the tailwinds received from the IRA legislation as it will accelerate the de-carbonization efforts in the US and result in higher local manufacturing of solar equipment. This would make the adoption of renewable technologies commercially viable.
Citadel Investment Group raised its stake in Sunrun Inc. (NASDAQ:RUN) by 76% in the second quarter of the year.
Besides Sunrun Inc. (NASDAQ:RUN), stocks like Tesla, Inc. (NASDAQ:TSLA), Shell plc (NYSE:SHEL), and Enphase Energy, Inc. (NASDAQ:ENPH) are also among the best climate change stocks to buy now.
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Disclose. None. 11 Best Climate Change Stocks To Buy According To Hedge Funds is originally published on Insider Monkey.
