UK Stocks Supporting Net Zero Emissions
London Stock Exchange, say hello to the UK Committee on Climate Change.
The UK Committee on Climate Change (CCC) provides independent expert advice to the UK government on how to reach net-zero carbon emissions. In their recent 6th carbon budget report, the CCC identify the need for a huge scaling up of investment in key industries over the coming decade. The committee also describes how the UK government needs to support private investment into these industries, but private investors needn’t wait. There are already companies listed on the London Stock Exchange that clearly resonate with the CCC plan.
The London Stock Exchange provides a good starting point to identify sustainable stocks with their Green Economy Mark (GEM). To carry the mark a company must “generate at least half of its revenue from environmental solutions”. Some solutions the GEM includes may not be considered by all to be good environmental solutions (nuclear power for instance). However, most of the stocks with the GEM are less controversial.
Not all solutions included within the GEM are targeted at achieving net zero, instead looking at other environmental issues. Therefore, I have studied the activities of 94 issuers with the GEM and share below a subset which I consider to positively support the key areas of investment set out in the CCC 6th carbon budget.
I do not offer this as investment advice but as a pointer towards companies to consider if you wish to investigate the impact of your investments on reaching net zero. I leave you to judge whether it makes good financial sense to invest in them. If using Trading 212, I have created a pie that includes most of these stocks. The description of each company is drawn from information on their websites.
Electricity supply
The renewable electricity sector is well established and fast growing. Over the coming decades it doesn’t only need to make up the current electricity demand, but match an approximate doubling in demand by 2050. This growth in electricity demand will arise as transport and heating systems are electrified.
Good Energy [GOOD]: Generates and purchases renewable electricity, and supplies green electricity and gas to homes and businesses throughout the UK.
Active Energy Group [AEG]: Second generation biomass products that can be used in coal fired-power industry and existing renewable biomass industry.
Invinity Energy Systems [IES]: Vanadium flow battery systems for commercial & industrial sites, grid network infrastructure projects and off-grid applications, which can be used alongside renewable energy.
Simec Atlantis Energy [SAE]: A sustainable energy developer, including tidal and power stations using waste fuel pellets. Some of the business involves conversion of power stations to burn non-recyclable waste.
Buildings
UK emissions from buildings, arising in large part from heating, reduced by less than 20% between 2008 and 2018. An electrification of heating is needed, through use of heat pumps, thereby allowing use of renewable energy. However, efficient use of electricity and heating in buildings will remain important whether the electricity is decarbonised or not. As a result, companies looking to increase the energy efficiency of buildings by various means will play a significant role in the decarbonisation of the UK economy.
EEnergy Group [EAAS]: A technology company focused on energy reduction and decarbonisation solutions.
Inspired Energy (INSE]: Commercial energy and sustainability advisors.
ACCSYS [AXS]: Produces high performance, sustainable wood building products.
Kingspan Group [KGP]: Provides insulation and building envelope solutions.
Sabien Technology Group [SNT]: Provider of energy reduction and cloud-connected carbon management technologies for the commercial heating sector.
Smart Metering Systems [SMS]: Funds, installs, operates and manages smart meters and carbon reduction assets, including EV chargers and battery storage systems.
Xeros Technology Group [XSG]: Sustainable solutions for laundry and apparel manufacturing. (Not “buildings” exactly but may come under buildings emissions in some cases).
Surface transport
UK surface transport saw basically no reduction of emissions between 2008 and 2018. This means it is now the UK sector with the largest emissions. The CCC scenarios include a reduction in total car miles by up to 34% by 2050, expected to partly come from a shift towards walking, cycling and low-carbon public transport. Remaining car journeys will need to be powered with renewable electricity.
Ilika [IKA]: Developers of solid state battery technology.
Go-Ahead Group [GOG]: A public transport operator. The largest operator of electric buses in the UK (according to their own website).
National Express Group [NEX]: A transport provider. In the five years to the end of 2018, emissions per million passenger km declined by 13% (according to their own website).
Proton Motor Power Systems [PPS]: Fuel cell producer.
Verditek [VDTK]: Developers and producers of lightweight, flexible solar panels, providing new energy solutions to cover surfaces not previously considered suitable for solar power. This includes vehicles but also various buildings and other surfaces.
Fuel supply (i.e. hydrogen)
Some industries and forms of transport may remain difficult to power directly on renewable electricity for decades to come. Instead, in some cases the use of hydrogen can be appropriate. Most hydrogen is currently produced using fossil-fuel, but it is possible to produce it using renewable electricity. The latter, sustainable form of production is called green hydrogen.
ITM Power [ITM]: Produces electrolysers, a key component of green hydrogen.
Ceres Power [CWR]: A fuel cell technology and engineering company. Their products can generate power from conventional fuels like natural gas and from alternative fuels like biogas, ethanol or hydrogen.
Waste, recycling and the circular economy
The CCC investment chart (top of article) does not show waste as requiring the same high levels of investment as other sectors. However, the 6th carbon budget report does highlight the need to increase recycling and develop a circular economy. The following companies are connected to such approaches.
Polypipe [PLP]: Produces pipes and fittings using recycled materials where appropriate, with all products 100% recyclable at the end of their useful life. One of the UK’s largest processors of post-consumer waste (according to their own website).
Renewi [RWI]: A waste to product company.
DS Smith [SMDS]: A provider of sustainable packaging solutions, paper products and recycling services.
Smurfit Kappa Group [SKG]: Producer of paper-based packaging. 75% of their raw material is recycled fibre (according to their own website).
Stock exchanges are not the only way to sustainably invest
1) Shift your bank account to a company who doesn’t invest in fossil fuels. UK banks have billions invested in fossil fuel exploration. Alternatives include Triodos and Ecology Building Society. Most building societies will not have investments in fossil fuels.
2) Consider direct investment in projects and companies that are not listed on stock exchanges. Opportunities related to reaching net-zero emissions can be found on the Abundance and Seedr platforms.
3) Explore many of the different ways to have a positive financial impact with the folk at Good With Money.
Please share your views. I welcome criticism.