Climate change has the potential to have a devastating impact on the economy and the stock market. Rising temperatures due to global warming are linked to more natural disasters, coastal flooding and a range of other problems.
According to a report by Swiss Re, one of the world’s leading insurers, the effects of climate change could reduce global economic output by 11% to 14% by 2050. That could wipe out up to $23 trillion of the world’s gross domestic product. Such a decline in global economic output would have a significant effect on the stock market.
Dire warnings like this inspire governments and businesses to get serious about reducing carbon emissions to lessen the impact of climate change. They are pumping billions of dollars into renewable energy and electric vehicles (EVs) to reduce the use of fossil fuels. They are also investing in emerging climate technologies to advance the fight against climate change.
It will take a global effort to reduce carbon emissions to combat the effects of climate change. However, clear leaders are emerging in this battle helping to accelerate the transition to a cleaner future.
Here’s a look at some of the companies that are helping to lead the charge against global warming. They stand out as some of the best climate change stocks to consider buying.
The main actions related to climate change to watch
Many companies take their social responsibility seriously by working to offset their carbon emissions to reduce the long-term impacts of climate change. Several emerge as ESG investing leaders by leading efforts to increase renewable energy production and reduce the use of fossil fuels. Meanwhile, others are investing in emerging climate technologies, which could help reduce the impact of global warming.
Key climate change actions to consider include:
Here’s a closer look at these top climate change actions.
Tesla is on a mission to accelerate the global transition to sustainable energy. He led almost single-handedly to the adoption of electric vehicles. The company is an industry leader, producing both luxury vehicles and more affordable cars. It also develops semi-trailers, mid-size SUVs and zero-emission trucks.
Electric vehicles are just one part of Tesla’s sustainable energy ecosystem. The company also manufactures a range of solar energy and storage products to increase the use of renewable energy. It aims to make climate technology products more accessible and affordable to more people, helping to accelerate the adoption of clean transportation and energy generation. One of the ways he did this is to bring EV battery in-house production to reduce costs.
Tesla delivered nearly one million electric vehicles in 2021, up nearly 90% from the previous year. The company is rapidly ramping up production, adding new manufacturing capabilities in Texas and Germany to complement its plants in California and China. It has a bold goal of producing 20 million electric vehicles a year over the next decade as it helps accelerate the acceleration towards more sustainable transport.
NextEra Energy is a world leader in the production of energy from the wind and the sun. It is also a world leader in battery storage. the electric utility is one of the largest in the United States and has a large-scale, competitive energy business that operates clean energy generation assets, gas pipelines and power transmission lines.
The company’s focus on renewable energy has paid off over the years. NextEra has grown earnings per share at a compound annual rate of 9% over the past decade, three times faster than its rivals. This has helped fuel above-average dividend growth and above-market total returns.
NextEra Energy has an extensive pipeline of ongoing renewable energy and battery storage development opportunities as it continues to lead the decarbonization of the power grid. It also invests in emerging climate technologies such as green hydrogen, which uses renewable energy to electrolyze water and produce emission-free hydrogen. The fuel has a range of potential uses in the energy, industry and transport sectors and could help further reduce emissions.
Brookfield Renewable operates one of the largest renewable energy platforms in the world. It has hydroelectric, wind, solar and energy storage facilities in North and South America, Europe and Asia. It primarily sells the electricity it generates under long-term contracts to users such as electric utilities and large power purchasers.
The company is also a leading developer of renewable energy assets. It entered 2022 with 36 gigawatts (GW) of renewable energy development projects, enough to power 7 million homes for a year. It’s a significant pipeline for a company that also entered the year with an operating portfolio of 21 GW. These operating assets currently offset the greenhouse gas emissions equivalent to removing 6 million gasoline-powered vehicles from the road.
Brookfield’s global reach has made it a partner of choice for businesses and governments looking to meet their carbon reduction goals. This helps fuel above-average earnings growth.
ChargePoint Holdings operates the largest electric vehicle charging network in the world. Its network includes 163,000 charging stations in North America and Europe. It holds 70% of the fast charging market, seven times more than its closest competitor.
ChargePoint sells electric vehicle charging equipment to companies that own the sites or charging stations. It also sells the software to operate this hardware as part of software as a service (SaaS) model. It incorporates this into a service program that includes a full warranty on parts and labor, so its business model generates recurring revenue long after ChargePoint has installed the hardware.
Although already a leader in electric vehicle charging, ChargePoint sees a lot of growth ahead. Electric vehicle sales are expected to reach 9.9% of vehicles sold in the United States and Europe by 2025 and 29.2% by 2030 (from 2.6% in 2019). This should lead to significant investment to continue building charging infrastructure for all new electric vehicles. With this cumulative investment expected to exceed $60 billion by 2030 and $192 billion by 2040, ChargePoint still has plenty of growth ahead.
Stem operates smart battery storage solutions that help maximize renewable energy. Its Athena software uses advanced artificial intelligence (AI) and machine learning to seamlessly switch between onsite generation, grid power and battery storage. It reduces energy costs, stabilizes the grid, improves renewable energy intermittency and reduces carbon emissions.
There is a huge opportunity ahead of us for battery storage, which is critical for renewable energy applications because the sun doesn’t always shine and the wind doesn’t always blow. Forecasters estimate that battery storage capacity will increase 35 times by 2030 as the development of renewable energy accelerates. Longer term, there is a $1.2 trillion revenue opportunity for embedded storage over the next 30 years.
Stem is a pioneer in helping companies deploy smarter battery storage systems. It does not manufacture batteries. Instead, it buys them from manufacturers to create an integrated hardware and software solution for customers that combines Athena with third-party batteries. The model generates revenue at deployment and recurring revenue from the software component for a decade or more. Stem has a large and growing portfolio of integrated battery storage installation opportunities that should support high power growth for years to come.
Leading the charge to fight climate change
The dire warnings about the catastrophic impact of climate change are disturbing. However, they have urged governments and other institutions to take measures to mitigate its effects more seriously by reducing carbon emissions as quickly as possible.
Several companies have stepped up to lead the charge towards a more sustainable world. These actions related to climate change should benefit from continued investments in the sector. This should help make the world a better place in the long run while creating shareholder value.