5 Great Green Stocks Making a Direct Impact

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published 25 February 2022

It's the end of business as usual. To save the planet, consumers, companies and governments all over the world are stepping up their sustainability game, or at least pledging to do so.

That's important, because it will take all parties working to fight climate change if we are to get to a net zero-world – when carbon emissions are balanced by absorption – by 2050, which is part of the goal of the Paris Agreement, an international treaty to tackle climate change that came into force in 2016.

No company is perfect. China is the world's biggest maker of solar panels, but many of its plants are coal fired. Even so, if we use those solar panels to power our homes, we're helping the environment in the long run. "It's a life-cycle analysis," says Gabriela Herculano of iClima Earth, an impact-oriented investment firm. "You look at the manufacturing phase and the end-user phase. Solar panels have a lifespan of 30 to 35 years – time you’re not using fossil fuels."

Be patient. Whether a company is a consumer-products giant or a pure-play green firm, any significant environmental benefits from their goods or services could take years to realize. Athletic-wear company Lululemon (LULU), for instance, is trying to come up with a synthetic textile that can be recycled. (The global fashion industry produces 58 million tons of material every year. Much of that ends up in landfills or on a bonfire; less than 1% is reused to make new clothes.) It's early days, but "it's a great example of forward thinking about how to make a direct, sustainable impact" and an indication of potential long-term growth at the firm, says Putnam's Collins.

Stay open-minded. It would be wonderful to invest only in pure-play green stocks that are making direct, positive environmental impacts, but currently those opportunities are either too few or too nascent. Meanwhile, many large companies, which have the resources to explore and innovate, are making solid strides to combat climate change. These efforts may not impact their revenues or earnings much – for now – but they are notable.

Procter & Gamble (PG), for instance, developed a technology that PureCycle Technology is using to turn discarded carpets and drinking cups into ultra-pure polypropylene that is used to make other recyclable plastic products. Ford (F) is already taking orders for the F-150 Lightning, the electric version of its best-selling truck. The Lightning's battery is bidirectional, which means it can also serve as a generator that can power a home for up to three days when fully charged.

And Nvidia's (NVDA) computer chips helped scientists map rain forests in Peru. By studying the maps, researchers learned there were 36 different types of rain forests; they previously had thought there were only three. The discovery changed the government's strategy for protecting animals and the rain forests, says Andrew Niebler, a comanager of Karner Blue Biodiversity Impact fund. "Nvidia is a game-changer in terms of scientific advancement in biodiversity and nature."

Disclaimer

Returns and other data, unless otherwise noted, are as of Feb, 4.

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Stock Watch

Allbirds

Reversing climate change is a company objective at Allbirds (BIRD, $11), the footwear start-up that launched in 2016 with a single model of sneakers sporting all-wool uppers.

The company takes carbon neutrality seriously. Allbirds already sources much of the wool it uses from sheep farmers that engage in regenerative agricultural practices; it has pledged to source 100% of its wool from sustainable farmers by 2025. And four years ago, with a Brazilian partner, it developed a shoe-sole material that it says has a negative carbon footprint (it's made of sugarcane, a low-carbon-intensity feedstock, in facilities powered by renewable energy).

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Ball

The more we reuse and recycle, the better off our planet will be – less trash means fewer landfills and lower greenhouse gas emissions. Ball, best known for its glass jars, is a big player in the so-called circular economy.

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Lucid Group

To achieve net-zero emissions by 2050, BofA Global Research estimates that electric vehicle sales need to rise from 20% of global car sales today to 60% by 2030 and 100% by 2035. That bodes well for EV makers, including Lucid Group (LCID, $28), which had its IPO in July.

BofA analyst John Murphy says Lucid is "one of the most legitimate" start-up electric vehicle automakers and a "competitive threat" to incumbent automakers. Underpinning his recommendation of the stock is the company's electric powertrain technology – Lucid has been the sole supplier of battery packs and software for Formula E, the electric-car motorsport league, since 2018 – and its efficient battery, which promises a longer range (500 miles) than the Tesla Model S Plaid (390 miles) or the Porsche Taycan Turbo S (201 miles).

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Planet Labs

Planet Labs' (PL, $6) network of 200 high-frequency satellites circle the globe all day, every day, snapping millions of images. These real-time images, which most Planet customers subscribe to receive, are vital to monitoring the health of agricultural crops, rain forests, rivers and oceans, among other things, over time.

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Royal DSM

Cattle pose a big challenge for the environment for many reasons, among the largest being the methane gas they produce when they belch and break wind.

Its cow-feed additive, Bovaer, cuts methane emissions and is now approved for use in Brazil, the world's biggest beef exporter, and Chile. Just one-fourth of a teaspoon of Bovaer per cow per day will reduce methane emission by 30% for dairy cows and up to 90% for beef cattle. That could be one of the biggest positive impacts on the environment made by a single company. David Winborne, of Pax Global Environmental Markets (PGRNX), a member of the Kiplinger ESG 20 list of favorite ESG funds, says the additive has "enormous potential."

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Nellie joined Kiplinger in August 2011 after a seven-year stint in Hong Kong. There, she worked for the Wall Street Journal Asia, where as lifestyle editor, she launched and edited Scene Asia, an online guide to food, wine, entertainment and the arts in Asia. Prior to that, she was an editor at Weekend Journal, the Friday lifestyle section of the Wall Street Journal Asia. Kiplinger isn't Nellie's first foray into personal finance: She has also worked at SmartMoney (rising from fact-checker to senior writer), and she was a senior editor at Money.