Environmental, social and governance. This is what ESG investing is all about. And ESG stocks aren’t just a nice-sounding, soft and fuzzy investing concept. The biggest institutional investors in the game support this trend.
This is the head of the company that is in charge of the Federal Reserve’s $750 billion bond portfolio put in place during the pandemic. And it’s already the largest money manager in the world.
This is about big business and big opportunities.
And the insiders are already pursuing ESG stocks in their portfolios, buying up these companies before the broader market catches on.
The real point in ESG investing is about encouraging companies to put in place better models that facilitate better visibility into their corporate structure. As investors, this is a good thing.
The eight stocks that will cash in on the massive ESG movement below are great examples of how this is playing out now.
- Hannon Armstrong Sustainable Infrastructure Capital (NYSE:HASI)
- Brookfield Renewable Partners (NYSE:BEP)
- Prologis (NYSE:PLD)
- Waste Management (NYSE:WM)
- FMC Corporation (NYSE:FMC)
- NextEra Energy (NYSE:NEE)
- Xcel Energy (NYSE:XEL)
- Dominion Energy (NYSE:D)
Hannon Armstrong Sustainable Infrastructure Capital (HASI)
The company has been around for more than 30 years, so Hannon Armstrong Sustainable Infrastructure Capital deserves some respect in the alternative energy world.
As a matter of fact, a significant amount of its portfolio is managing the energy efficiency in buildings, working on distributed grids and energy storage. More recently it has become a larger player in renewable energy generation and sustainable infrastructure markets.
It’s structured as a real estate investment trust (REIT) and currently has a healthy 3.7% dividend. What makes HASI truly interesting it the fact that many of its projects are backed by U.S. government funding and it has a number of U.S. government contracts — a great customer in uncertain times.
The stock is up almost 40% in the past year and is well situated moving forward.
ESG Stocks: Brookfield Renewable Partners (BEP)
This Canadian company operates as a limited partnership, which means it pays its shareholders a percentage of the net profits in the form of a dividend. A lot of U.S. energy companies also use this structure to do business.
What it means for you is, as BEP’s business grows, so does your dividend. Right now, that dividend is just bumping up on 5%. A generous dividend encourages investors to stick around for the long term, which allows BEP to use that money to grow its renewable energy portfolio.
It currently has over 2,000 assets — including solar, wind and hydroelectric facilities as well as other real estate — across 30 countries on five continents. And the company is big enough to be able to take advantage of deals that smaller companies can’t touch.
It also has a $201 billion real estate portfolio with nearly 300 properties in the U.S., Canada, India, South Korea, Australia, Brazil, the United Kingdom and Germany.
And even with that massive dividend, the stock is up 53% in the past 12 months.
One thing that the pandemic has shown us all is that the new business model is all about logistics. E-commerce has soared in recent months as lockdowns have slowed traditional retail.
That means warehouses are now key to getting products from factories to customers, especially as brick-and-mortar stores fall by the wayside. It also means retailers have to find distribution centers that are close to their customers so they can deliver products without it costing more than using storefronts.
PLD is a REIT that specializes in logistics facilities. It has more than 960 million square feet across 13 countries on four continents.
And it scores ESG points because those facilities are run efficiently, lowering operating costs and consuming less energy, which helps companies’ margins and keeps consumer prices competitive.
Its second-quarter earnings were released in late July and business is booming. The stock delivers a 2.2% dividend and is up almost 34% in the past year.
ESG Stocks: Waste Management (WM)
It may seem odd to see a leading waste management company on a list of top ESG stocks. But remember, being able to manage the significant amount of waste that is generated by the economy is a huge challenge.
Remember a year ago when China and other Asian nations began to stop accepting U.S. trash, especially recyclables? That seemed to be a paradigm shift — before the novel coronavirus of course.
But WM is a successful company because it was already a leader in waste-to-energy technology. It understood a long time ago that if it could generate money from its waste it could get paid twice — once for collecting the waste and then again for selling energy back to the grid or an energy company. That is ESG thinking.
It has plants around the U.S. and Canada providing significant energy to power 35,000 homes in some areas or large factories in others. And the trash will keep on coming.
WM stock has a 2% dividend, and although the stock is off about 4% in the past 12 months, it is coming back. Sexier companies are now pulling investor money so it’s a good time to get in.
FMC Corporation (FMC)
FMC Corporation is another company that the casual observer might not put on a list of ESG stocks, but it shows how broad the ESG universe is.
FMC has been making agricultural chemicals for 137 years. And that means it has built quite a reputation with farmers, nurseries and weekend gardeners.
By developing chemicals that allow for better productivity, FMC ensures that more crops can be grown successfully on a given amount of land. That’s a very big deal when it comes to keeping agriculture a viable business, whether it’s massive commercial farms or local farmers.
What’s more, stay-at-home orders, food shortages and closures of local markets have many people going back to gardening. That is good for FMC stock.
The stock pays a 1.6% dividend and it’s up 30% in the past year. That strong performance will likely continue.
ESG Stocks: NextEra Energy (NEE)
The stoic, electricity-at-any-cost utility is going the way of the dinosaur. First, coal-powered generation, which was highly inefficient and dirty, became more of a problem than a solution.
Then, cheap and plentiful natural gas meant coal plants were swapped out. But all the while advances in renewables — like wind and solar — were making those technologies cheaper and cheaper.
Now, renewables are competitive with even cheap coal and natural gas. Many companies are jumping on board now.
Yet NEE is already there. It is the world’s largest producer of wind and solar energy. This is the company’s unregulated business. It sell this power to other utilities, factories, companies and governments. It also has Florida Power & Light, the utility for South Florida.
That means it has a solid regulated business in one of the fastest-growing regions of the country and an unregulated business with huge demand.
The stock is up 36% in the past year and delivers a 2% dividend.
Xcel Energy (XEL)
This Minnesota-based utility is also a darling of the next-generation utilities. It offers electricity to 3.6 million customers and natural gas to another 2 million customers across Minnesota, Wisconsin, North Dakota, South Dakota, Colorado, Texas and New Mexico.
Two years ago, it announced that by 2050 it would deliver 100% clean, carbon-free electricity. And it said it would realize an 80% reduction in carbon emissions from 2005 levels by 2035. It was the first major utility to establish such a goal.
It’s important to note that XEL was in coal country and had more than a dozen coal-fired plants operating from cheap, accessible coal.
But this daring shift has paid off. The stock is up 17% in the past year, on top of a healthy 2.5% dividend.
ESG Stocks: Dominion Energy (D)
This utility is one of the biggest on East Coast, powering Virginia and its neighboring states.
This was a massive shift for Dominion, since it was moving heavily into natural gas distribution and had been for a decade or more. But it was a smart move, and one you rarely see from a conservative company with a $67 billion market cap.
It is now turning its sights toward a robust renewables effort. This is big news for the renewables industry. And it places D stock as a major attraction in the expanding ESG market.
You see, more institutional investors means more stability of capital for Dominion and that helps keep investment capital high and borrowing costs low. Now the company has $10 billion in its pocket, no natural gas pipeline liabilities and ultra-low interest rates if it needs to borrow to build out renewables capacity.
That’s a pretty good deal.
The stock has a bulletproof 4.7% dividend and is up 7% in the past 12 months.
Neil George was once an all-star bond trader, but now he works morning and night to steer readers away from traps — and into safe, top-performing income investments. Neil’s new income program is a cash-generating machine … one that can help you collect $208 every day the market’s open. Neil does not have any holdings in the securities mentioned above.