We recently published a list of 10 Best Environmental Stocks to Buy. In this article, we are going to take a look at where Aptiv PLC (NYSE:APTV) stands against other best environmental stocks to buy.
Environmental stocks have gained attention in recent times with more investors being interested in stock stability and increased regulatory focus for climate change issues and the financial markets. They are often favored for their potential to tap into environmental opportunities, as consumers, regulators, and companies seeking to meet Net-Zero targets increasingly look for new and innovative solutions to combat climate change and overcome environmental challenges.
Fund managers looking to meet their transition strategies are heavily shifting towards low-carbon solutions and projects. Potential growth projects include renewable energy projects, nuclear energy restarts and renewals, solar, battery storage projects, carbon capture and storage, and new natural gas capacity among others. The US SIF Trends Report 2024/2025 identified that 73% of surveyed investors expect the sustainable investment market to be on the rise in the next 2 years, driven by client demand, regulatory requirements, and advances in data analytics. The fund landscape is fast changing with transition investing becoming the major focus for investors, even with the potential uncertainties due to the Trump administration’s proposal to revoke EV tax credits, driven by new technologies in the sector and decreases in costs. The outlook for renewable energy is still positive. A PwC report finds that ESG-focused institutional investment will rise 84% to $33.9 trillion in 2026, comprising over 21.5% of assets under management. Environmental stocks have experienced fluctuating performance, influenced by market dynamics and investor sentiment in recent years. In 2022, U.S. ESG funds net inflows decreased significantly from $69.2 billion in 2021 to $3.1 billion, the lowest level in seven years. 2023 followed a similar trend, with ESG funds in the U.S. experiencing net outflows exceeding $5 billion in the final quarter, the most substantial quarterly withdrawal in over five years. Poor investment performance and increased political scrutiny were driving forces for the slowdown. Even with the market challenges and fluctuations, certain companies within the environmental sector have demonstrated strong resilience. In summary, while investor opinions of stronger environmental stocks performance over traditional stocks remain debatable, select firms continue to stand resilient in the ever-evolving ESG landscape.
What Are Environmental Stocks?
Several funds are focused on industry stocks for companies that provide products and services in climate solutions or green investments that work towards reducing harmful pollutants or sustainable resource use. This can either be in the area of alternative technologies, e.g. solar/wind power, or other areas of environmental solutions such as waste management. As industries that rely heavily on fossil fuels and create pollution are facing higher costs, fines, and regulatory scrutiny, the market opportunity for alternatives is on the rise. Several mutual funds and index funds are looking at these alternative investments that provide a strong potential for future returns.
The Green Economy Index Family tracks the sectors focusing on the enhancement of economic development based on the reduction of carbon usage. These sectors include energy efficiency, bio/clean fuels, and pollution mitigation. Environmental stocks form a key part of sustainable investing, and therefore, by prioritizing environmental concerns, investors can contribute to long-term sustainability and reduce the negative costs of climate change.
However, with growing fund manager attention and the potential of gains through policy benefits, the risk of greenwashing and misleading claims by companies is also becoming a significant challenge. This has led financial watchdogs to increase scrutiny and seller responsibility in several geographies that specify accurate ‘labels’ for levels of environmental and green funds. With the US Securities and Exchange Commission (SEC) ESG Disclosure Rule, stricter and more enforceable ESG regulations and disclosure requirements are on the horizon for the US markets.
Our Methodology
To come up with the best environmental stocks to buy list, we have considered all US environmental stocks that feature on different indexes and have upscale potential. To identify stocks from the environmental sector we have used the FTSE Green Revenues Classification System, to come up with the sectors that are working in the provision of green solutions, these included companies involved in alternative energy generation, water and wastewater treatments, transport solutions, and pollution control. We then used Insider Monkey’s Hedge Fund Q3 2024 database to rank 10 stocks based on the number of hedge fund holders. Our list is sorted in ascending order according to hedge fund sentiment.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A closeup of a hand holding a car engine component, highlighting the precision of the company’s engineering.
Aptiv PLC (NYSE:APTV)
Number of Hedge Fund Holders: 52
Aptiv PLC (NYSE:APTV) is a global technology company serving the automotive industry with green solutions. Their product offerings include a portfolio of recycled plastic products including transmission brackets, wire shields, and floor side rails and platforms for fully electrified, software-defined vehicles. Aptiv’s Smart Vehicle Architecture enables OEM partners to make energy-efficient vehicles and reduce carbon emissions. In 2023, the company launched an advanced predictive battery management software (BMS) that employs physics-based algorithms to create a digital twin of the battery. The innovative product launch will enable more efficient and predictive management of battery systems for the optimization and longevity of electric vehicles. This demonstrated the company’s commitment to continuous innovation for sustainable solutions.
Aptiv PLC (NYSE:APTV) also displays strong environmental stewardship with its ambitious carbon footprint reduction targets. They aim to reduce their environmental footprint by 25% by 2025 from a 2021 baseline. It has set up robust strategies to employ energy efficiency measures and increased the adoption of renewable energy across its global facilities to achieve its targets. More than 30% of Aptiv’s global energy consumption is sourced from renewable energy currently. The company has installed solar panel projects at 14 sites worldwide, generating over 17 million kWh of electricity and eliminating nearly 9,800 tons of CO₂ equivalent emissions. With its strong commitment to building sustainability and climate resilience within its own operations and the crucial solutions it is providing to the EV industry, the company qualifies as an environmental stock to watch.
Looking at financial performance, Aptiv PLC (NYSE:APTV) recorded a revenue of $19.7 billion in 2024, with $4.9 billion being recorded in Q4. Record operating cash flow was delivered and a strong earnings growth with 140 basis points of operating margin expansion year-over-year was driven by cost discipline and solid execution. Overall, the company demonstrated resilience and growth in its financial performance. In the stock market, however, the company has experienced some fluctuations with its stocks declining by 24.6% over the year, compared to the broader-market growth. That said, in 2025, the stock scenario projects more hopeful trends as the year-to-date increase of 5% indicates a stock recovery.
Aptiv PLC (NYSE:APTV) has recently also announced the separation of their Electrical Distribution Systems business owing to strategic decisions to create better segmentation, which will possibly drive future long-term and more stable growth. The strategic move aligns with the broader trend among companies to streamline operations and enhance focus on core competencies.
Overall, APTV ranks 10th on our list of best environmental stocks to buy. While we acknowledge the potential for APTV as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than APTV but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
