12 Best Environmental Stocks to Invest In

Published on July 18, 2022 at 8:44 am by Omer Farooq in Hedge Funds, News

In this article, we will look at 12 best environmental stocks to invest in. If you want to explore similar stocks, you can also read 5 Best Environmental Stocks to Invest In.

With growing concerns about climate change and global warming, economies around the world are making efforts to go green and reduce or even eliminate their carbon footprint. Businesses, big and small alike, are setting their green energy goals and devising methods to achieve carbon-neutrality over the next decade.

How Are Investors Making Environmental Efforts

In the hedge fund industry, impact investing or ESG investing is becoming a popular practice among long-term investors. By employing impacting investment strategies, investors seek to bet on corporations that they see winning in the long term. Typically these corporations’ business models are built on top of sustainable and renewable sources as they aim to mitigate environmental risks and engage in eco-friendly activities instead of relying on scarce resources. Some of the major sectors that impact investors are bullish on include renewable energy, organic agriculture, and green transportation among others.

A Notable Impact Investor

Among the pioneers of impact investment strategies is Jeffrey Ubben, the co-founder, and ex-CEO of ValueAct Capital. Jeff Ubben laid the groundwork for ValueAct Capital’s long-term investment strategies that have helped the fund attain a median annualized return of 14% since inception through 2019. In 2020, Jeff Ubben retired from his roles at ValueAct Capital and went on to co-found Inclusive Capital, with Lynn Forester de Rothschild, to focus on ESG investing. Inclusive Capital also follows a long-term investment strategy with a focus on socially responsible investing. As of Q1 2022, Jeff Ubben manages more than $969.1 million in 13F securities through Inclusive Capital.

How To Make Your Investments Eco-Friendly

For retail investors that are looking to invest for the long-term and reap sustainable profits, there are certain ETFs and stocks that can make portfolios more ESG-friendly. Some of the best ESG ETFs to invest in include the iShares ESG Aware MSCI USA ETF (NASDAQ:ESGU), the Vanguard ESG U.S. Stock ETF(NYSEMKT:ESGV), and the iShares Global Clean Energy ETF (NASDAQ:ICLN).

Investors can also make their portfolios more ESG-friendly and sustainable by going long in environmental stocks. Some of the biggest corporations in the world that are working toward becoming completely green and running on renewable sources include Microsoft Corporation (NASDAQ:MSFT), Tesla, Inc. (NASDAQ:TSLA), Apple Inc. (NASDAQ:AAPL), and Alphabet Inc. (NASDAQ:GOOG). However, for this analysis, we have focused on including pure-play environmental stocks from multiple sectors such as Consumer Staples, Energy, Consumer Discretionary, and Industrials among others.

Photo by Tobias Rademacher on Unsplash

Our Methodology

To determine the 12 best environmental stocks to invest in, we looked for companies that are offering green and organic products. We reviewed their product portfolios and also the analyst and investor sentiment around them. We have ranked these stocks in increasing order of hedge fund holders.

Best Environmental Stocks to Invest In

12. ChargePoint Holdings, Inc. (NYSE:CHPT)

Number of Hedge Fund Holders: 16

ChargePoint Holdings, Inc. (NYSE:CHPT) is a leading global provider of electric vehicle charging networks and charging solutions. The company offers a portfolio of hardware, software, and services for commercial, fleet, and residential customers. As of 2022, ChargePoint Holdings, Inc. (NYSE:CHPT) operates a network of over 18,000 charging locations.

Analysts are bullish on ChargePoint Holdings, Inc. (NYSE:CHPT). On June 17, B. Riley analyst Christopher Souther initiated coverage of ChargePoint Holdings, Inc. (NYSE:CHPT) with a Buy rating and a $20 price target. Souther said that he is bullish on the company because of its leading market position, dominant market share, and growth strategy. Souther noted that ChargePoint Holdings, Inc. (NYSE:CHPT) has over 70% market share in networked Level 2 charging in North America and 5,000 commercial and fleet customers all around the world. These facts compelled us to include ChargePoint Holdings, Inc. (NYSE:CHPT) among the best environmental stocks to invest in now.

At the close of Q1 2022, 16 hedge funds were bullish on ChargePoint Holdings, Inc. (NYSE:CHPT) and held stakes worth $34.71 million in the company.

Market leaders that are riding the green energy wave include Microsoft Corporation (NASDAQ:MSFT), Tesla, Inc. (NASDAQ:TSLA), Apple Inc. (NASDAQ:AAPL), and Alphabet Inc. (NASDAQ:GOOG).

11. Brookfield Renewable Partners L.P. (NYSE:BEP)

Number of Hedge Fund Holders: 18

Brookfield Renewable Partners L.P. (NYSE:BEP) operates as a renewable energy company in North America, Colombia, Brazil, Europe, India, and China. The company generates electricity through hydroelectric, wind, solar, distributed generation, pumped storage, cogeneration, and biomass sources. The company owns hydroelectric, wind, solar, and storage facilities in North America, South America, Europe, and Asia, and as of 2022 has 21,000 megawatts of installed capacity with a 69,000-megawatt development pipeline. Brookfield Renewable Partners L.P. (NYSE:BEP) has a strong portfolio and solid position in the renewable energy business, therefore making it a top environmental stock pick from the clean energy sector.

On May 9, TD Securities analyst Sean Steuart upgraded Brookfield Renewable Partners L.P. (NYSE:BEP) to Buy from Hold with a $41 price target.

Hedge funds are piling into Brookfield Renewable Partners L.P. (NYSE:BEP). At the end of Q1 2022, 18 hedge funds disclosed ownership of stakes in the company. The total value of these stakes amounted to $261.96 million, up from $234.36 million a quarter ago with 21 positions.

In the first quarter of 2022, Select Equity Group raised its stakes in Brookfield Renewable Partners L.P. (NYSE:BEP) by 132%, bringing them to $107.76 million. As of March 31, Select Equity Group owns more than 2.6 million shares of Brookfield Renewable Partners L.P. (NYSE:BEP) and is the largest shareholder in the company.

ClearBridge Investments, an investment management firm, mentioned Brookfield Renewable Partners L.P. (NYSE:BEP) in its “Global Infrastructure Income Strategy” first-quarter 2022 investor letter. Here is 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.”

10. United Natural Foods, Inc. (NASDAQ:UNFI)

Number of Hedge Fund Holders: 20

United Natural Foods, Inc. (NASDAQ:UNFI) distributes natural, organic, specialty, produce, and conventional grocery and non-food products in the United States and Canada. The company operates through Wholesale and Retail segments. Organic food is a rapidly growing trend among consumers around the world as people become more aware of its health and ESG benefits. According to market intelligence agency, Grand View Research, the global organic food and beverages market was valued at $188.35 billion in 2021 and is expected to grow to $208.19 billion in 2022. Organic food stocks like United Natural Foods, Inc. (NASDAQ:UNFI) are well positioned to gain more market share with these trends, making the stock one of the best environmental stocks to invest in right now.

Analysts are bullish on United Natural Foods, Inc. (NASDAQ:UNFI). On June 8, MKM Partners analyst Bill Kirk raised his price target on United Natural Foods, Inc. (NASDAQ:UNFI) to $69 from $66 and reiterated a Buy rating on the shares. On June 29, Deutsche Bank analyst Krisztina Katai raised her price target on United Natural Foods, Inc. (NASDAQ:UNFI) to $53 from $46 and maintained a Hold rating on the shares.

At the close of Q1 2022, 20 hedge funds held stakes in United Natural Foods, Inc. (NASDAQ:UNFI). The total value of these stakes was estimated at $115.40 million, up from $101.56 million a quarter ago with 21 positions.

In the first quarter of 2022, Intrinsic Edge Capital raised its stakes in United Natural Foods, Inc. (NASDAQ:UNFI) by 111%, bringing them to $23.08 million. As of March 31, Intrinsic Edge Capital owns more than 0.55 million shares of United Natural Foods, Inc. (NASDAQ:UNFI) and is the largest shareholder in the company.

9. Clearway Energy, Inc. (NYSE:CWEN)

Number of Hedge Fund Holders: 24

Clearway Energy, Inc. (NYSE:CWEN) engages in the renewable energy businesses in the United States. Currently, the company operates roughly 100 solar farms and has 210 megawatts of operating solar capacity, which makes it one of the largest solar developers in the United States, and therefore one of the best environmental stock picks from the solar energy sector.

Clearway Energy, Inc. (NYSE:CWEN) is expanding its operations. On June 28, the company announced signing an agreement with Capistrano Wind Partners by which Clearway Energy, Inc. (NYSE:CWEN) will acquire a portfolio consisting of wind projects for $255 million in cash. The wind portfolio consists of five utility-scale wind projects that have a total capacity of 413 megawatts and are located in Texas, Nebraska, and Wyoming.

On June 9, CIBC analysts initiated coverage of Clearway Energy, Inc. (NYSE:CWEN) with a Neutral rating and a $36 price target.

At the close of Q1 2022, 24 hedge funds were long Clearway Energy, Inc. (NYSE:CWEN) with stakes worth $181.20 million. This is compared to 21 positions in the previous quarter with stakes worth $182.66 million.

As of March 31, Renaissance Technologies is the largest shareholder in Clearway Energy, Inc. (NYSE:CWEN) and owns over 1.2 million shares of the company. The fund’s stakes are valued at $43.10 million, up 6% from its prior stakes in Q4 2021.

Here is what ClearBridge Investments had to say about Clearway Energy, Inc. (NYSE:CWEN) in its “Global Infrastructure Income Strategy” fourth-quarter 2021 investor letter:

“Clearway Energy primarily owns and operates contracted renewable generation assets. It also owns and operates conventional generation and thermal infrastructure assets. Clearway Energy’s share price continued to benefit from the completed sale of its thermal assets, which was above expectations, generating USD$1.3 billion in incremental proceeds. Additionally, there was optimism surrounding a stimulus bill passthrough which contains renewables subsidies.”

8. Sunnova Energy International Inc. (NYSE:NOVA)

Number of Hedge Fund Holders: 26

Sunnova Energy International Inc. (NYSE:NOVA) has expanded its solar footprint in 39 U.S. states and is a leading provider of residential energy services in the United States. Sunnova Energy International Inc. (NYSE:NOVA) has a vast consumer base of over 200,000 residential customers and is consumers’ go-to solar installation company. The company’s consumer base and dominating market share make it stand out and rank among the best environmental stocks to invest in.

Analysts are bullish on Sunnova Energy International Inc. (NYSE:NOVA). On June 29, Wells Fargo analyst Michael Blum initiated coverage of Sunnova Energy International Inc. (NYSE:NOVA) with an Equal Weight rating and a $22 price target. The analyst expects the company’s consumer base to grow by 18% over the next decade.

At the end of Q1 2022, 26 hedge funds were long Sunnova Energy International Inc. (NYSE:NOVA) and held stakes worth $124.41 million in the company. This is compared to 25 positions in the previous quarter with stakes worth $149.91 million.

In the first quarter of 2022, Citadel Investment Group raised its stakes in Sunnova Energy International Inc. (NYSE:NOVA) by 1342%, bringing them to $31.26 million. As of March 31, Citadel Investment Group owns over 1.35 million shares of Sunnova Energy International Inc. (NYSE:NOVA) and is the largest shareholder in the company.

Here is what ClearBridge Investments had to say about Sunnova Energy International Inc. (NYSE:NOVA) in its “Small Cap Strategy” first-quarter 2022 investor letter:

“We initiated a new position in Sunnova (NYSE:NOVA), in the energy sector. Sunnova is a residential solar and energy storage company that enables adoption through a network of installers with options for financing, service and broader home energy management. Rising interest rates and solar energy supply constraints weighed on the stock’s performance in the fourth quarter of 2021 but created a compelling valuation opportunity to buy this business when the market was embedding low growth expectations. We believe Sunnova will deliver value accretive growth for a much longer time, with its downside limited by the long-term, fixed-rate, high- quality contracts it has with customers.”

7. NIO Inc. (NYSE:NIO)

Number of Hedge Fund Holders: 26

NIO Inc. (NYSE:NIO) designs, develops, manufactures, and sells smart electric vehicles in China. The company offers five, six, and seven-seater electric SUVs, as well as smart electric sedans. On July 1, the company announced its second quarter 2022 delivery results and reported delivering roughly 25,000 vehicles in the second quarter of 2022, up 14.4% year over year. For June, NIO Inc. (NYSE:NIO) reported delivering 13,000 vehicles, up 60.3% year-over-year. In addition to reporting strong delivery results, the company reported that it will start deliveries for the ES7, ES8, and ES6 in August 2022, all of which are equipped with the company’s latest technology platforms.

Analysts are bullish on NIO Inc. (NYSE:NIO). On June 30, HSBC analyst Yuqian Ding raised his price target on NIO Inc. (NYSE:NIO) to $28 from $26 and reiterated a Buy rating on the shares. On July 1, Nomura analyst Martin Heung cut his price target on NIO Inc. (NYSE:NIO) to $25.80 from $51.50 but maintained a Buy rating on the shares.

Positive analyst sentiment and strong demand for NIO Inc.’s (NYSE:NIO) electric vehicles made the company one of our best environmental stock picks from the green transportation sector.

At the end of Q1 2022, 26 hedge funds were bullish on NIO Inc. (NYSE:NIO) with stakes worth $716.09 million. This is compared with 30 positions in the prior quarter with stakes of $813.67 million.

As of June 30, ARK Investment Management is the largest stakeholder in NIO Inc. (NYSE:NIO) and has stakes of over $6.75 million.

Here is what Horos Asset Management, an investment management firm, had to say about NIO Inc. (NYSE:NIO) in its first-quarter 2022 investor letter:

“At the beginning of April the CSRC (China Securities Regulatory Commission) announced possible changes in its regulation that would allow this inspection by foreign auditors, provided that the companies previously communicate to this body the state secrets that would be exposed, as well as the sensitive information that they might have to hand over, and the subsequent audit is carried out in a framework of collaboration with the CSRC. In short, a move in the direction desired by the SEC, although still far from the optimal result, that is, unrestricted access to information. While these negotiations between the two regulatory bodies are progressing, Chinese companies have to decide how best to preserve their interests. Other entities, such as the electric vehicle manufacturer Nio, have just started trading on this stock market.”

6. The Hain Celestial Group, Inc. (NASDAQ:HAIN)

Number of Hedge Fund Holders: 29

The Hain Celestial Group, Inc. manufactures, markets, and sells organic and natural products in the United States, United Kingdom, and internationally. The company’s most prominent organic food brands, out of 40 total, include Celestial Seasonings, Farmhouse Fare, Frank Cooper’s, Hain Pure Foods, and Sensible Portions among others. The Hain Celestial Group, Inc. (NASDAQ:HAIN) is a leader in the organic food industry and is also one of the best environmental stocks to invest in right now.

Analysts are bullish on The Hain Celestial Group, Inc. (NASDAQ:HAIN). On June 16, Piper Sandler analyst Michael Lavery trimmed his price target on The Hain Celestial Group, Inc. (NASDAQ:HAIN) to $31 from $36 but maintained a buy-side Overweight rating on the shares.

At the close of Q1 2022, 29 hedge funds were long The Hain Celestial Group, Inc. (NASDAQ:HAIN) with stakes worth $203.94 million. Of these, Paradice Investment Management was the dominating shareholder in The Hain Celestial Group, Inc. (NASDAQ:HAIN), with stakes worth over $42.6 million.

Here is what Carillon Tower Advisers had to say about The Hain Celestial Group, Inc. (NASDAQ:HAIN) in its “Carillon Scout Mid Cap Fund” first-quarter 2022 investor letter:

“Organic food company Hain Celestial (NASDAQ:HAIN) declined after it guided to disappointing sales growth and announced a CFO change. This company continues to execute its transition strategy to focus on core brands while divesting non- strategic brands that lack scale.”

The Hain Celestial Group, Inc. (NASDAQ:HAIN) is a pure-play environmental stock to invest in from the organic food sector. Other companies that are setting and striving to achieve their ESG goals include Microsoft Corporation (NASDAQ:MSFT), Tesla, Inc. (NASDAQ:TSLA), Apple Inc. (NASDAQ:AAPL), and Alphabet Inc. (NASDAQ:GOOG).

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