With Climate Change “Code Red” For Humanity, Which Major Companies Are Actually Walking the Walk?
There’s a common misconception. Green energy and renewable energy are not the same things. In fact, if you want to look at technicalities, green energy is actually a subset of renewable energy.
Green energy refers to energy sources and technologies that provide the highest environmental benefit. The EPA, for example, defines explicitly green energy as power produced from “solar, wind, geothermal, biogas, eligible biomass, and low-impact small hydroelectric sources.”
Other renewable energies may not be considered fully green according to the EPA’s criteria. As an example, large-scale hydro projects can provide renewable energy while harming the environment. Biomass can also be considered “non-eligible” and nowhere near being carbon-neutral.
That’s why it’s not shocking to see that green energy globally could be worth $962 million by 2026. That’s a robust 4.7% CAGR from just $730 million in 2020.
From an investor’s perspective, this could be big too. Many institutional investors are pressuring companies to add more environmental, social, and governance (ESG) characteristics into their portfolios. According to Bloomberg, assets with strong ESG principles could hit $53 trillion AUM by 2025, a third of global AUM.
Plus, with green energy becoming more affordable and mainstream, major companies have started to look at the bigger picture and set lofty carbon neutrality and climate commitments, such as:
|Apple||Net Zero Carbon Emission||2030|
|Burger King||Net Zero Operations||2030|
|Microsoft||Net Zero Carbon Emission||2030|
|BBC||Net Zero Carbon Emission||2030|
|Net Zero Value Chain||2030|
|Verizon||Net Zero Carbon Emission||2035|
|Unilever||Net Zero Carbon Emission||2039|
|Pepsi Co.||Net Zero Carbon Emission||2040|
|BP||Net Zero Carbon Emission||2050|
But Until It Happens NOW, It’s All Just Talk
As a youth climate activist Greta Thunberg so eloquently put it at a September 28 youth climate summit in Milan: “blah, blah, blah, blah.”
Thunberg mocked world leaders, including US President Joe Biden and UK Prime Minister Boris Johnson. She said the last 30 years of climate action had amounted to “blah, blah, blah” and mockingly repeated their commonly used catchphrases.
“When I say climate change, what do you think of? I think jobs. Green jobs. Green jobs…We must find a smooth transition towards a low carbon economy. There is no Planet B…There is no Planet Blah. Blah, blah, blah, blah, blah, blah…This is not about some expensive, politically correct dream at the bunny hugging or blah, blah, blah. Build back better, blah, blah, blah. Green economy, blah, blah, blah…Net zero, blah, blah, blah. Climate-neutral, blah, blah, blah. This is all we hear from our so-called leaders — words, words that sound great but so far, has led to no action or hopes and dreams. Empty words and promises,” Thunberg said.
What She Failed To Mention, However, Were The Big Companies Acting NOW
Based on data from the EPA, VisualCapitalist, on September 27, published an infographic by SolarPower.Guide. The infographic shows the top 50 greenest companies, based on the highest proportion of green energy used in their overall consumption mix.
Of course, there is no space to fit the entire infographic (which you can see in its entirety at the above link), but here are the Top 5 companies:
Except for Sephora, a French multinational retailer of personal care and beauty products, these companies are all publicly traded on the NYSE. Let’s go through each company, see how their stocks have done, and discuss how they’re doing their part when it comes to climate change.
1. The Estee Lauder Companies Inc. (NYSE: EL)
Estee Lauder is an American multinational manufacturer and marketer of skin care, makeup, fragrance, and hair care products with a diverse portfolio of brands. Its multiple subsidiaries are all distributed internationally through both digital commerce and retail channels.
According to a November 2, 2020 press release, the company has reached net-zero carbon emissions. It is now entirely using renewable electricity to meet 100% of its global demand. This was due to strategic investments in energy-efficient technologies and processes, along with renewable energy.
“When large companies like The Estée Lauder Companies set their sights on an ambitious target, they can achieve huge change at a rapid pace,” The Climate Group’s chief executive Helen Clarkson said. “This is exactly the sort of leadership we need to see in the climate decade as we work to halve global emissions.”
So while the stock may have retreated from the $347.82 high it reached on September 2, it’s up roughly 45.51% ever since trading as low as $212.73 a year ago to the date (September 29). All while being at or near oversold territory based on its 14-day RSI and MACD Oscillator.
2. Voya Financial (NYSE: VOYA)
Voya Financial is an American financial, retirement, investment, and insurance company based in New York City. It has traded as an independent company since 2013 after spinning off from ING Group.
Voya Investment Management (Voya IM), Voya Financial’s asset management branch, is getting aggressive regarding clean energy. It recently announced that its private credit platform completed the first close of a new infrastructure debt fund with over $300 million in commitments to finance renewable energy projects. Voya IM has made three renewable energy infrastructure investments to date, including a recent agreement to provide $30 million in debt financing to Bakersfield Renewable Fuels. The objective here is for Bakersfield to help retrofit a crude oil refinery to produce renewable diesel from soybean oil and other plant-based feedstock. Centaurus Renewables also recently secured a $70M loan from Voya.
Along with recently making its Arizona facility entirely solar-powered, Voya expects to finance between 12 and 18 additional investments in renewable energy. The vast majority of these investments are expected to be in the U.S. Voya also expects roughly half of these investments to focus on wind and solar projects, with the other half funding sustainable infrastructure projects such as battery storage and renewable fuels.
Although the stock has had an up and down September (who hasn’t), it could be at an attractive entry point below its 50-day and 200-day moving averages as it attempts to regain some lost ground. Overall, since touching a low of $46.53 in October 2020, it’s rallied an excellent 30.5%.
3. BNY Mellon (NYSE: BK)
BNY Mellon is an American investment banking services holding company based in New York City. It is one of the 100 largest banks globally and has long been actively investing in renewable energy sources.
It seems like this company has been leading the green energy wave before anyone else. Google “BNY Mellon Green Energy.” You’ll come across a presser from 11 years ago talking about a five-year renewable energy commitment covering 75% of BNY Mellon’s U.S. electric consumption.
BNY Mellon also financed a wind energy project in Texas which has been in operation since 2014. This 200-MW Hereford Wind Project generates power sufficient for approximately 55,000 homes, avoiding 375,000 tons of greenhouse gas emissions a year.
One of the ways BNY Mellon has been supporting green energy is through its Green Bonds. The bank supports issuers worldwide to raise capital via green and other forms of sustainable bonds. BNY, though, is doing this at such a high level that in both 2019 and 2020, it was the leading trustee in green bonds by deal volume, according to CEO Todd Gibbons.
In 2019, BNY Mellon issued 116 green bonds representing approximately $38 billion in issuance volume or 13.4% of global renewable investments. The bank also had a market share of 15% in deal value for green bonds during 2019.
2020 was similar, with over 100 new green bond issuances administered totaling $38.7 billion.
BNY Mellon also developed a task force on climate-related financial disclosures (TCFD) reporting plan. In February 2021, it additionally published its Considering Climate at BNY Mellon report. On top of this, BNY achieved carbon neutrality in its operations for the sixth consecutive year.
After trading as low as $32.50 in late October 2020, the stock has rallied a rock-solid 62.8%. Plus, after pulling back in September to as low as $48.74, the stock has gone on a nice 8.56% run with a potential trend reversal.
4. Bank of America (NYSE: BAC)
Bank of America is one of the Big Four banking institutions in the U.S., along with JPMorgan Chase, Citigroup, and Wells Fargo. It serves approximately 10.73% of all American bank deposits, is the second-largest bank in the United States, and is the eighth-largest bank globally.
While its primary financial services revolve around commercial banking, wealth management, and investment banking, it’s been making waves with green energy too.
Bank of America launched the Environmental Business Initiative in 2007. This initiative plans to deploy and mobilize $1 trillion by 2030 to accelerate the transition to a low-carbon, sustainable economy. It’s intended to complement a broader $1.5 trillion sustainable finance goal aligned to addressing the United Nations’s Sustainable Development Goals (SDGs).
Since the launch of this initiative, Bank of America has deployed more than $200 billion to low-carbon, sustainable business activities, including “expanding its asset-based lending, tax equity investment and capital raising activities across current and emerging clean energy and power, transportation and other industry sectors important for environmental transition.”
The company also plans to achieve net-zero emissions before 2050.
Bank of America’s stock has had a similar chart trajectory as BNY’s stock. After trading as low as $22.65 in late October 2020, the stock rallied a whopping 90.55% to its $43.16 closing price as of September 28, 2021. Now just cents away from its record high, it’s also gone on a solid 12.51% run after pulling back to $38.36 on September 20, 2021.
Key Takeaways On Green Energy
What’s especially striking about the Top 5 companies using the highest amount of green energy is that 2 are beauty companies, and 3 are financial companies. That just shows how much more widespread the use of green energy is becoming through multiple business verticals.
It’s clear that climate change is becoming more and more of a threat to humanity. After all, did you see the weather patterns from the past summer? The insane wildfires, the catastrophic floods, and the hurricanes occurring in places that rarely even have hurricanes?
For investors looking to put their money where their mouth is, you can’t do much worse than looking towards companies walking the walk instead of “blah, blah, blah.” Outside of being ethical, investing in our planet’s future could make you some serious gains, too.