Three green stocks for growth investors to buy now

Professional investor Luciano Diana of the Pictet Global Environmental Opportunities Fund picks three stocks with strong environmental credentials that should help safeguard the world’s natural resources.

From New Delhi to Bengaluru, India is home to some of the most polluted urban centres in the world. But this year, its skies turned clear and blue for the first time in decades after the coronavirus lockdown shut factories, grounded flights and removed cars and trucks from the roads. As residents across the country breathed clean air and spotted stars at night, those in the northern state of Punjab could see the Himalayan mountain range more than 100 miles away.

The sudden halt in economic activity has drastically cut pollutant emissions and shrunk humanity’s ecological footprint. But it requires a fundamental shift in our economic structures to build a more sustainable post-pandemic world. 

From air pollution to climate change, tackling environmental problems will take a monumental effort. Investors, as stewards of global capital, have a crucial role to play in placing the world on a more sustainable footing.

New environmental equities

For investors, the opportunity to bring about change has never been greater. With governments and businesses responding to pressure to contain ecological degradation, a distinct and attractive group of environmental-equity investments has emerged. 

These are companies that combine strong environmental credentials with innovative products and services designed to safeguard the world’s natural resources. The environmental-product industry is one of the world’s most dynamic: already a $2.5trn market, it is expected to grow by an annual 6%-7% over the next few years. The Global Environmental Opportunities Fund focuses exclusively on this sector. Central to our strategy is a ground-breaking scientific framework called Planetary Boundaries. This is a model, developed in 2009 by scientists at the Stockholm Resilience Centre, identifying nine factors – including carbon emissions (climate change), biodiversity, fresh water and land use – crucial to maintaining the stable biosphere required for human development and prosperity. 

The most promising subsectors

We use this framework to identify firms with the strongest environmental credentials across their entire value chain – from the extraction of raw materials to manufacturing processes, distribution and transport, product use, and disposal and recycling. 

One particularly promising subsector is environmental testing. Companies that provide tools for air, water, soil and food quality measurement comprise a $5bn market growing strongly in emerging economies. Strong performers in this area include Thermo Fisher Scientific (NYSE: TMO), a leading manufacturer of laboratory equipment and scientific instruments for the healthcare and environmental markets.

Using resources responsibly

Resource efficiency is another key theme: companies operating in simulation and advanced industrial design and engineering solutions, such as Ansys (Nasdaq: ANSS) and Autodesk (Nasdaq: ADSK), help the planet use its limited resources responsibly. Ansys is a leader in industrial-simulation and design software. Autodesk specialises in computer-aided design software, with a particular emphasis on applications for architecture and engineering.

Recommended

Why an ESG approach is particularly suited to bond investors
Sponsored

Why an ESG approach is particularly suited to bond investors

ESG investing, which focuses on the environmental, social and governance aspects of a business, is all the rage. David C Stevenson explains how bond i…
9 Nov 2020
I wish I knew what ESG investing was, but I’m too embarrassed to ask
Too embarrassed to ask

I wish I knew what ESG investing was, but I’m too embarrassed to ask

ESG investing – investing with a focus on environmental, social and governance issues – is the latest incarnation of ethical investing. Here's what it…
23 Sep 2020
ESG investing
Glossary

ESG investing

ESG stands for environmental, social and corporate governance, the areas in which good behaviour is particularly sought.
19 Jun 2020
Luciano Diana: ESG investing and a welcome dose of optimism amid the gloom
Investment strategy

Luciano Diana: ESG investing and a welcome dose of optimism amid the gloom

Pictet's Luciano Diana talks about ESG investing, climate change and the challenges of Covid-19 and how, while things are tough in the short term, the…
28 Apr 2020

Most Popular

The FTSE 100 is set for a makeover with an influx of new tech stocks
UK stockmarkets

The FTSE 100 is set for a makeover with an influx of new tech stocks

The FTSE 100 – the dullest index in the world – is about to reinvent itself as a host of new firms list on the market. The change is long overdue, say…
24 Jan 2021
Think Tesla is a bubble? This might be the best way to bet on it bursting
Oil

Think Tesla is a bubble? This might be the best way to bet on it bursting

The huge rise in Tesla’s share price means that, by market value, it’s now the sixth-largest company in the US and and the world’s biggest car-maker. …
25 Jan 2021
Why we won’t see a house-price crash in 2021
House prices

Why we won’t see a house-price crash in 2021

Lockdown sent house prices berserk as cooped up home-workers fled for bigger properties in the country. And while they won’t rise quite as much this y…
18 Jan 2021