In this article we take a look at 10 companies that will benefit from global warming. You can skip our detailed discussion about the state of climate change, renewable energy investments and go directly to 5 Companies That Will Benefit From Global Warming.
In a race against time for survival and existence, the developed world has launched a multi-pronged initiative to cut net carbon emissions to zero by 2050, an ambitious goal set by the Paris Agreement. The arrival of President Biden in the White House and U.S. rejoining the Paris agreement will infuse a new hope in the renewable energy industry and give rise to a barrage of investments in the already expanding green energy sector.
Explosive Growth Opportunities
According to a report by UNEP, Bloomberg New Energy Finance and the Frankfurt School, global investment in new clean energy capacity rose 1% in $282.2 billion. Investments in the U.S. jumped 28% to reach $55.5 billion. The report said that declining costs for solar and wind projects are making it easier for new entrants to invest in the market. As compared to the conventional energy projects, renewable energy projects are more profitable, a study done by Imperial College London and the International Energy Agency found. The research analyzed stock market data to determine the rate of return on energy investments over a five- and 10-year period. The results showed that investments in renewable energy in Germany and France yielded returns of 178.2% over a five year period, compared with -20.7% for fossil fuel investments. In the U.K. investments in renewable energy generated returns of 75.4%, compared to just 8.8% for fossil fuels. In the U.S., returns came in at 200.3%, significantly above 97.2% for fossil fuels.
Global warming and climate change has drastic effects on various sectors, industries and segments. For example, massive wildfires in the U.S. caused by climate change caused major utility company PG&E to declare bankruptcy after failing to service potential liabilities of at least $30 billion. Similarly, insurance companies are at the risk of facing heavy liabilities and claims amid raging wildfires and effects of climate change in the U.S. A report by RAND found that wildfires in the U.S. caused by greenhouse gas emissions (GHG) could potentially affect the health of the insurance market, policy affordability, coverage adequacy, and insurer profitability. Effects of global warming will also be consequential for water utility companies as they will have to find new methods of water delivery and management.
Winds of Change
The energy sector is already facing the heat after President Biden’s immediate action against major oil projects. The President revoked the permit for the Keystone XL pipeline from Canada and moved to stop oil companies from drilling in Alaska’s Arctic National Wildlife Refuge. Biden had clearly announced his plans to “transition away from the oil industry” during his candidacy.
10 Companies That Will Benefit From Global Warming
With this context in mind, let’s take a look at 10 companies that will benefit from global warming.
Florida-based NV5 Global is a relatively unknown stock, but it has a technology that resolves a key problem caused by global warming. The company struck deals with the California government to provide underground power line technology, reducing the risks of damages and infrastructure collapse during wildfires. The company also provides solutions to monitor and save energy.
A total of 9 hedge funds tracked by Insider Monkey held stakes in NV5 global entering the fourth quarter. Charles Paquelet’s Skylands Capital owns 87,766 shares of the company, worth $4.63 million. (Read: Here is What Hedge Funds Think About NV5 Holdings Inc (NVEE))
Sun Power is one of the 10 companies that will benefit from global warming. The company sells crystalline silicon photovoltaic cells and solar panels based on an all-back-contact solar cell invented at Stanford University.
As of the end of the third quarter, 14 hedge funds tracked by Insider Monkey held stakes in the company. The net value of these positions is $91.3 million.
SunPower shares have gained about 700% over the last 12 months.
BEP ranks 8th in our list of the companies that will benefit from global warming. Brookfield Renewable Partners operates renewable energy projects, with over 200 hydroelectric plants and 100 wind farms. It has a total capacity of about 19,400 MW, with 5,318 generating facilities in North America, South America, Europe and Asia. Hydroelectric power projects account for about 64% of the company’s portfolio.
In October 2020, the company entered a five-year agreement with JPMorgan for supplying the firm’s 500 offices with renewable energy.
PLUG ranks 7th in our list of the companies that will benefit from global warming. New York-based Plug Power sells hydrogen fuel cell systems that replace conventional batteries in electric cars. The stock is up a whopping 1400% over the last 12 months. It is gaining immense popularity in Reddit chat boards. In January, JPMorgan started covering Plug Power at Neutral rating with a $60 price target. The bank’s analyst Paul Coster said that PLUG is his top pick in the hydrogen space. However, the analyst said that the stock is now fully valued.
A total of 21 hedge funds tracked by Insider Monkey held long positions in Plug Power at the end of the third quarter.
Here's what Massif Capital said about Plug Power stock in its Q2 Investor Letter:
We also closed our short position in Plug Power (NASDAQ:PLUG) this quarter as the market was subsumed with enthusiasm over their recent acquisitions, resulting in an almost 80% rally in the stock over ten trading days. Our decision to exit was painful at the time as we were forced to reconcile with a collective exuberance that was (and is, in our opinion) not grounded reality. In hindsight, it was the correct decision as we avoided most of its recent vertical trajectory. Like SunRun, we have several signposts in front of us for Plug Power that would prompt a re-enter.
Canadian Solar sells solar PV modules and operates major solar projects. The company has delivered around 52 GW of solar modules to customers in 150 countries, as of the end of 2020. In January, Citi initiated coverage of Canadian Solar stock with Buy rating and $71 price target. Citi’s analyst J.B. Lowe believes the stock has more room to run even after hitting new highs recently on the back of module capacity expansion and vertical integration.
Hedge funds are loading up on Canadian Solar. At the end of the third quarter, 25 elite funds tracked by Insider Monkey held stakes in the company, up from 12 funds a quarter earlier.
