For investors looking to get behind the cleanest and greenest tech, there can be a dizzying number of stocks to choose from. Climate tech is a complex sector to understand and can be extremely volatile, with share prices rocketing and shrinking in response to policy and regulatory changes.
So, what is climate tech and which are the best climate stocks to invest in?
What is Climate Tech?
In short, climate technology encompasses technological solutions which play a part in reducing humanity’s impact on the environment. This can mean anything from solar panels to innovative recycling methods.
It looks like a good time to invest in the segment too, with the US government’s Inflation Reduction Act bringing $369bn of climate investment to the space. It’s widely acknowledged to be the most aggressive climate action ever attempted by the White House and it’s a very strong signal about the way the winds are blowing.
So, surely climate technology is a great space to invest in? Some investors certainly think so.
Here are a few climate tech stocks which are definitely worth a look if you’re thinking of investing in the space.
Clearway Energy
Clearway Energy (NYSE: CWEN) is a major owner and developer of US clean energy, with the business specializing in solar and wind energy.
Though the business’ revenues dipped from $351m to $340m in the most recent quarter, the company reduced operating costs from $262m to $235m. Consequently, its net income has increased from $25m to $62m. Even so, this represented the business missing investors’ expectations.
Nevertheless, the stock looks like an enticing prospect. That’s because, in addition to already existing as a profitable business, Clearway has an enormous amount of capital on hand to fund further growth. The company had total liquidity of $1.6bn at the end of its most recent quarter, courtesy of having received proceeds from the sale of its Thermal Business.
With the renewable energy market expected to almost double in size between 2020 and 2027, rising from $613.8bn to $1.13trn, the business has a strong opportunity to take a front seat in the green revolution.
It’s worth noting that this stock has held up well across the year to date, too, dropping by just 0.6% when a number of competitors have run into difficult territory. It’s currently on an upward trajectory, having climbed by more than 15% across the last month. Additionally, the stock has had a dividend yield of around 4% for the last 12 months.
If you’re looking for a dividend stock in the clean energy space, Clearway is well worth considering.
First Solar
Solar looks like playing a key role in the green transition. First Solar (NASDAQ: FSLR) is a giant in the solar energy space and a leading light in the renewable energy space.
The business prides itself in developing and manufacturing the best solar technology, claiming that its thin-film photovoltaic modules represent the next generation of solar technologies by providing a competitive, high-performance, lower-carbon alternative to conventional crystalline silicon panels.
Additionally, the company’s solutions can be constructed in a single manufacturing plant in a matter of hours, while typical solar solutions normally have to be transported between different factory locations and take days to be fully constructed.
While the company’s sales are steadily rising, having climbed from $583.4m to $628.9m in its most recent quarter, it is still largely a loss-making operation. Rising costs are a potential concern, but First Solar is investing significantly in expansion and creating a market-leading product.
While the business has 6 manufacturing plants across the US, Malaysia and Vietnam that offer a nameplate capacity of around 9 GW, further expansion in the US and India is expected to lead this to rise to 16 GW in 2024.
In short, the business looks like it is building a leading position in a market that could explode in popularity over the next decade or so.
Ameresco
The quest to supply renewable energy might make up the bulk of climate tech headlines, but companies like Ameresco (NYSE: AMRC) are providing progressive and clean solutions in other areas besides.
This business owns 360 MWe of renewable energy projects but is also a specialist in upgrading infrastructure and implementing energy-efficient solutions.
This means the company can help businesses make their buildings and infrastructure more efficient and climate-friendly by reducing energy and water demand or creating on-site energy generation solutions.
Looking at the numbers, the way in which the business’ sales have soared in the past year is impressive. Ameresco's revenue climbed by 61% to $441.3m in its most recent quarter. Additionally, the business is consistently turning a profit, with a net income climbing by 57% to $27.4m during the period.
With expertise across renewable energy and cleantech integration, the diversification of this business appears to make it well-suited to benefit from the rising interest in climate consciousness and corporate ESG targets.