In this article, we will take a look at the 13 best climate change stocks to invest in. To see more such companies, go directly to 5 Best Climate Change Stocks To Invest In.
As governments around the world push for a greener future, climate investing is gaining popularity. Companies are finally starting to understand the enormous opportunities in the sustainable investment sphere. Data shows that funds that focus on sustainable investing managed to perform well in 2022, when the broader market faced a huge turmoil amid the macroeconomic situation. According to a Wall Street Journal report, investments in sustainable funds in the US, including stocks, bonds and other categories, fell to $3.1 billion in 2022 from $69.2 billion a year earlier. This decline seems paltry when compared to conventional funds (funds that don’t take into account ESG when investing) which suffered a whopping $370 billion worth of withdrawals in 2022.
The WSJ report added that 75% of the total inflows seen by sustainable funds in 2022 were from fixed-income funds, a surprise when seen in the context of the rising interest rate environment.
The Importance of Climate Investing
As humanity inches closer to a point of no return in terms of carbon emissions, climate-focused groups in investing circles are voicing their concerns and pushing companies to start paying more attention to ESG when taking decisions. Investor Group on Climate Change recently warned in a report that in order to avoid “catastrophic” long-term risks, money managers will need to make an effort to measure the physical impact of climate change across their portfolios, according to Bloomberg. The group analyzed 53 funds with more than $20.2 trillion under management globally. Results of the study show just under a quarter of the funds have assessed their portfolios for these climate-related risks.
For this article we decided to focus on companies that are working on solutions for the climate change problem and have a high exposure to industries that play a key role in the climate change dynamics. For that we decided to analyze JPMorgan’s Climate Change Solutions ETF. The ETF invests in companies developing innovative climate change solutions. JPMorgan says it uses human expertise as well as AI models to manage its ETF and pick stocks for the fund.
We analyzed the JPMorgan’s ETF and picked 13 stocks with the highest number of hedge fund investors. We gauged hedge fund sentiment for stocks using Insider Monkey’s database of 943 hedge funds tracked as of the end of the fourth quarter of 2022. The list is ranked in ascending order of the number of hedge fund investors.
West Fraser Timber Co. Ltd. (NYSE:WFG) is a Canadian Forestry company that makes lumber, LVL, MDF, OSB, plywood, pulp, newsprint, and other wood-related products. West Fraser Timber Co. Ltd. (NYSE:WFG) says it’s committed to a sector initiative to remove 30 megatonnes (MT) of CO2 per year by 2030. West Fraser Timber Co. Ltd. (NYSE:WFG) on its websites says it replants more trees that it cuts. In 2019 it planted 63.4 million native tree seedlings in Canada. West Fraser Timber Co. Ltd. (NYSE:WFG) is one of the notable stocks on the JPMorgan’s Climate Change Solutions ETF.
As of the end of the fourth quarter of 2022, 15 hedge funds tracked by Insider Monkey had stakes in West Fraser Timber Co. Ltd. (NYSE:WFG). The total value of these stakes was $177 million. The biggest stakeholder of West Fraser Timber Co. Ltd. (NYSE:WFG) was Alexander Mitchell’s Scopus Asset Management, with a $35.2 million stake.
Robotics and automation company ABB Ltd (NYSE:ABB) is an important part of the JPMorgan’s Climate Solutions ETF. ABB Ltd (NYSE:ABB) has committed to three initiatives of the Climate Group of global companies. By 2030, it plans to electrify its fleet of more than 10,000 vehicles, source 100% of its required electricity from renewables, and improve energy efficiency across its operations. ABB Ltd (NYSE:ABB) has slashed its own CO2 emissions by 39% since 2019.
As of the end of the fourth quarter of 2022, 16 hedge funds tracked by Insider Monkey reported owning stakes in ABB Ltd (NYSE:ABB). The net worth of these stakes was $701 million.
Earlier in March, ABB Ltd (NYSE:ABB) said it will buy back shares worth up to $1 billion after completing an earlier buyback program launched in the past year.
Xylem Inc. (NYSE:XYL) makes solutions related to water. This gives Xylem Inc. (NYSE:XYL) a huge exposure to climate change solutions industry. In addition to making solutions related to efficient use of water, Xylem Inc. (NYSE:XYL) is also investing for carbon reductions. According to Xylem, in 2020, Xylem Inc. (NYSE:XYL) helped customers cut their carbon footprint by 0.7 million metric tons of CO2 by using more efficient products and solutions.
In February, Xylem Inc. (NYSE:XYL) announced a whopping 10% increase in its quarterly dividend. During the fourth quarter, its adjusted EPS came in at $0.92, beating estimates by $0.13. Revenue in the quarter increased by 13.6% on a YoY basis to reach $1.5 billion, beating estimates by $90 million.
At the end of the fourth quarter of the last year, 21 hedge funds tracked by Insider Monkey had stakes in Xylem Inc. (NYSE:XYL).
Aristotle Capital made the following comment about Xylem Inc. (NYSE:XYL) in its Q3 2022 investor letter:
“Xylem Inc. (NYSE:XYL), the water equipment and services supplier, was a leading contributor for the quarter. The company’s solutions and technology continued to enjoy strong global demand as public utilities, as well as industrial, commercial and residential clients, seek solutions to treat, test, transport and preserve water. Similar to other industries, Xylem’s business has been impacted in the short term by the effects of inflation and chip‐supply constraints (that are now moderating), leading to an increasing backlog that has delayed the ability to fulfill orders. We believe Xylem’s portfolio of highly differentiated pumps, recognized for their quality and critical uses, as well as the company’s ability to cross‐sell and link other products, such as sensors and smart meters, will make it a one‐stop shop for utilities and protect the company from pure price competition. In our opinion, long‐term trends, such as water scarcity and the need to replace aging water infrastructure, create strong underlying demand for Xylem’s products through various parts of the economic cycle.”
Pennsylvania-based Evoqua Water Technologies Corp. (NYSE:AQUA) makes water and wastewater treatment systems and technologies. Evoqua Water Technologies Corp. (NYSE:AQUA) also provides emergency water supply solutions and contract services for industrial, commercial, and municipal water treatment markets.
Earlier in March, Evoqua Water Technologies Corp. (NYSE:AQUA) announced that it bought the Texas-based industrial water treatment service business of the former Bob Johnson & Associates from Kemco Systems.
As of the end of the fourth quarter of 2022, 24 hedge funds tracked by Insider Monkey reported owning stakes in Evoqua Water Technologies Corp. (NYSE:AQUA). The biggest stakeholder of Evoqua Water Technologies Corp. (NYSE:AQUA) during this period was Ian Simm’s Impax Asset Management which owns a $105 million stake in the company.
Weyerhaeuser Company (NYSE:WY) manages millions of acres of timberlands in North America. Weyerhaeuser Company (NYSE:WY) is one of the biggest holdings of the JPMorgan’s Climate Solutions ETF. In December 2021, Weyerhaeuser Company (NYSE:WY) said the Science Based Targets initiative approved its greenhouse gas reduction target as consistent with levels required to meet the goals of the Paris Agreement. As Weyerhaeuser Company (NYSE:WY) manages huge swaths of forests, it has a responsibility as well as an opportunity to come up with solutions for the climate change problem. In 2021 Weyerhaeuser Company (NYSE:WY) set a target to reduce direct emissions and indirect emissions from purchased energy (called Scope 1 and 2 emissions, respectively) by 42% by 2030 from a 2020 base year.
As of the end of the fourth quarter of 2022, 29 hedge funds tracked by Insider Monkey reported owning stakes in Weyerhaeuser Company (NYSE:WY). The biggest stakeholder of Weyerhaeuser Company (NYSE:WY) was Jean-Marie Eveillard’s First Eagle Investment Management which owns a $448 million stake.
Agricultural machinery company CNH Industrial N.V. (NYSE:CNHI) ranks 8th in our list of the best climate change stocks to invest in. In 2014, the company was recognized as a leader for its performance and quality of data related to climate change reduction by CDP Worldwide, a non-profit that helps companies and cities disclose their environmental impact. In 2015, CDP included the company in its Climate “A” List and gave a 100/100 score to the company for the transparent communication of its actions to fight climate change.
As of the end of the last quarter of 2022, 32 hedge funds tracked by Insider Monkey had stakes in the company.
Headquartered in Ireland, Trane Technologies plc (NYSE:TT) makes and sells solutions and products related to heating, ventilation, air conditioning, and transport refrigeration. Trane Technologies plc (NYSE:TT) is heavily focusing on technologies and products that will help reduce carbon emissions. Trane Technologies plc (NYSE:TT) has strong climate commitments for 2030 and plans to become carbon neutral by 2050.
As of the end of the fourth quarter of 2022, 39 hedge funds tracked by Insider Monkey reported owning stakes in Trane Technologies plc (NYSE:TT). The total value of these stakes was $2.3 billion. The biggest hedge fund stakeholder of Trane Technologies plc (NYSE:TT) was David Blood and Al Gore’s Generation Investment Management which had a $918 million stake in the company.
ClearBridge Investments made the following comment about Trane Technologies plc (NYSE:TT) in its Q3 2022 investor letter:
“Industrials holdings such as process and motion control company Regal Rexnord (RRX) and HVAC and transport refrigeration company Trane Technologies plc (NYSE:TT) also performed well, lifted by strong execution as both beat earnings and revenue expectations. Both companies should also benefit from the IRA as they enable greater energy efficiency in a variety of settings: Regal Rexnord innovates through best-in-class engineering capabilities to help customers achieve their energy efficiency objectives; Trane’s products enable lower energy demand and emissions in HVAC systems and buildings, where it estimates ~15%–25% of all GHG emissions are emitted.
Ranking 6th in our list of the best climate change stocks to buy is HVAC firm Carrier Global Corporation (NYSE:CARR). Carrier Global Corporation (NYSE:CARR) accounts for about 3.2% of the JPMorgan’s Climate Solutions ETF.
Insider Monkey’s database of 940 hedge funds and their holdings shows that 42 hedge funds had stakes in Carrier Global Corporation (NYSE:CARR) as of the end of the fourth quarter of 2022. The biggest stakeholder of Carrier Global Corporation (NYSE:CARR) was about $187 million.
