1. Accsys PLC

Accsys (LSE: AXS) is a building supplies manufacturer that produces and sells sustainable wood for construction. With its headquarters in London, Accsys sources wood from several locations across northern Europe, then exports it to countries around the world. The benefits of using wood as a building materiel are twofold. One is that wood is a renewable resource that can be carefully managed. The second is that wood acts as a carbon sink, a way to collect CO2 from the atmosphere and store it indefinitely. Storing carbon will become an important part of the green transition and could be a great source of revenue for the company in the future.

Accsys also treats its wood with unique chemicals to make it more durable and extend its effective lifespan.

Accsys does have some challenges to overcome. It has weathered the pandemic but took on debt to do so. However, revenues are up, and if Accsys is able to reduce its debt to pre-pandemic levels then I think it has a chance to become a great, renewable, growth stock.

2. AFC Energy

AFC Energy (LSE: AFC) is a Surry-based designer and manufacturer of hydrogen fuel cells and other hydrogen products. It currently has a patent on several modular fuel cell designs that are transportable and able to run on lower quality hydrogen (meaning with more impurities).

Hydrogen fuel cells work by mixing hydrogen with oxygen, releasing electricity and heat. Producing hydrogen is currently difficult and expensive, but it is possible to do so in a renewable fashion. This is called green hydrogen. If fuel cells are able to use lower quality hydrogen, then producing it will become cheaper, encouraging adoption by everyone else.

AFC has a great market capitalization of £342m and is currently trading at a very cheap 50.82p. It also doesn’t pay a dividend, which is something I like in new companies.

AFC has struggled through the pandemic and only has enough cash to sustain business for another year. It is expected to increase revenue by 100% each year, but is not projected to become profitable for another three years.

I strongly believe that hydrogen power has massive growth potential and will really help our economies to become more renewable. But for now, I will just be watching how AFC manages over the next few years.

Conclusion

The green transition is happening right now, and presents a very exciting opportunity. Both of the companies I’ve looked into today are relatively small, and have clear issues which need to be resolved. But I think they both have big potential upsides. I will not be adding either to my portfolio just yet, but will continue to keep a close eye on them both.

The post 2 ‘must watch’ FTSE 350 renewable stocks appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
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James Reynolds does not have a position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Taking a look at the holdings of the most popular clean energy ETFs is a good place for me to start my hunt for the best renewable energy stocks for 2021.

The top holding in the iShares II plc Global Clean Energy ETF  is Vestas Wind Systems, a Denmark-based manufacturer of wind power plants and wind turbines. Second is Orsted, another Denmark-based wind farm developer, which also does bioenergy and thermal power. Also in the top 10 holdings are the likes of US-based Xcel Energy and Nextera Energy and Enel, an Italian company. These three are power companies. They do have natural gas operations but also have sizeable renewable businesses.

All these companies are profitable. All, except Enel and Orsted, have grown their revenues over five years. However, buying foreign stocks in a Stocks and Shares ISA means extra forms to fill in, restricted dealing hours and foreign exchange transactions on buying, selling, or receiving dividends. Buying something like the iShares Global Clean Energy ETF or the Invesco Global Clean Energy ETF cuts out the fuss and would get me exposure to 80 or so clean energy stocks.

UK renewable energy stocks

But, I prefer picking UK-based stocks for my Stocks and Shares ISA. There are two that I am looking at closely as potential best of British renewable energy stocks for 2021. The first is SSE (LSE:SSE), an electricity generator, and the second is Ceres Power (LSE:CWR), a fuel cell company.

Almost two-thirds of SSE’s operating profits come from its renewable division. It has plans to treble its renewable power generation by 2030. That would be essential if millions of electric vehicles are tapping into the grid. I think once investors start to notice SSE is moving towards being the UK’s “pre-eminent green energy company”, its share price could soar.

However, transitions like this can be tricky to pull off. The company thinks £7.5bn worth of investment will be needed over the next five years. Furthermore, Ofgem is slashing the returns it allows companies like SSE to make between 2021 and 2016. That would make generating funds for investment harder and potentially affect the company’s ability to maintain its dividend. Perhaps SSE would have to seek alternative funding sources if Ofgem gets tough, potentially diluting existing shareholder returns.

Hydrogen stock

Ceres Power makes solid oxide fuel cells that generate power from natural gas and sustainable fuels like hydrogen, ethanol, and biogas. The company is also investing in reversing the process to make electrolysis cells that can produce hydrogen by splitting water. Revenue has grown from £1.11m to £31.68m over the five years to 2020, but the company is still making losses.

Ceres licences its technology to others to manufacture in return for royalties and milestone payments. Thus, Ceres runs an asset-light business model, which could be scaled up quickly without making large capital expenditures.

Shipping seems like a good application for hydrogen fuel. Ceres has licensed its tech for this use. But German engineering giant Bosch has also licensed it for land base use and owns around 18% of Ceres. Ceres is a speculative stock, but if hydrogen can grab a decent share of the future energy mix and Ceres can continue to find new licensing partners, this renewable energy stock could power up my portfolio. There is also the potential for a Bosh buyout.

The post What are the best renewable energy stocks for 2021? appeared first on The Twelfth Magpie.

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James J. McCombie has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Environmental, social, and corporate governance

2020 was a big year for the ESG or sustainable investing theme. Huge amounts of money flowed into stocks and funds that scored well across the three central factors for measuring the sustainability and societal impact of investing. The pandemic’s imminent threat seems to have sharpened focus on longer-term issues like climate change. Questions surrounding the fair treatment of workers, both before and after hiring are growing louder.

There are now requirements for fund managers to disclose how they incorporate ESG factors into their investment decisions. Also, individual companies are starting to report more on how they perform across the environmental, social, and corporate governance axis. ESG investing does appear to be coming of age.

One way to play the ESG trend might be to exclude companies that don’t score well. As examples, think of oil & gas companies that are not transitioning to a renewable future, or perhaps fast fashion companies that score poorly for sustainability. Trying to buy companies that do well on ESG measures is the more obvious path. However, defining what falls under the umbrella of ESG and how to score companies is tricky. Instead, I prefer to buy sustainable funds, that have the resources and expertise to develop a robust framework for selecting ethical investments, to play this trend. As examples, Royal London Sustainable leaders and Liontrust Sustainable Future Growth are two funds that have performed strongly over the last 10 years.

5G investment theme

The fifth-generation (5G) technology standard for broadband cellular networks means faster mobile (wireless) data speeds and greater capacity. Buying into telecommunications stocks might seem like the natural way to play the 5G investment theme. I am not so sure.

The most bandwidth-taxing activities of your average mobile network Internet connection user are streaming music and video. 4G is enough for the average user for now. The average user will likely transition to 5G-capable devices when they need to upgrade their mobile phone, rather than because they want a 5G device. Yet Telecoms companies have, and will continue to bid for 5G bandwidth in auctions. They have to do this to stay with the rest of the pack.

But, for some users now and an increasing number in the future, 5G does enable mobile online gaming, connected devices, crystal clear video conferencing from anywhere and augmented reality. I prefer to play the 5G trend by focusing on companies serving customers who want 5G right now.

IQE makes compound semiconductor wafers that end up in integrated circuits. It sees market growth opportunities in 5G handset applications and 5G infrastructure. Concurrent Technologies makes embedded computer products for use in many applications. Communications with and between embedded devices is something that 5G is beneficial for. Smart cities and homes, or the Internet of Things will rely on embedded devices and speedy communication between them. Spirent Communications helps businesses develop and test their 5G networks and 5G capable devices, among other things. 

This is how I would look to play the 5G investment trend: looking for companies that benefit from incremental adoption of 5G technologies.

The post I’m looking at these investment themes to build wealth in 2021 appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

James J. McCombie owns shares in Spirent Communications. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

So, I’m going to take a look at UK renewable energy stocks. And for those interested in investing in clean energy, here are some options.

UK renewable energy stocks

Those of us who prefer to invest in individual stocks have lots of choice when it comes to renewable energy.

In the large-cap area of the market, BP is one stock to consider. It isn’t an obvious renewable energy play as it’s one of the largest oil companies in the world! However, the company recently announced a huge transformation programme. It plans to eliminate the carbon footprint of the oil and gas it produces to ‘net zero’ by 2050.

Another large-cap stock I’d consider when looking at renewables is SDIC Power Holdings, a Chinese company engaged in the operation of electric power plants. It recently listed on the London Stock Exchange and has a market cap of £65bn.

In the mid/small-cap arena, there are a number of exciting renewable energy stocks too. Ceres Power Holdings is one. It’s a fuel cell technology company aiming to bring cleaner and cheaper energy to businesses, homes and vehicles. Its revenues have grown substantially in recent years although it’s still not profitable. 

ITM Power is another company to check out. It’s a clean-fuel company that specialises in hydrogen energy services. Its solutions take excess energy from the power network, convert it into hydrogen and use this clean energy in a wide range of applications.

Other renewable energy stocks I think are worth mentioning include Drax Group and Powerhouse Energy. The first is an electrical power generation business dedicated to enabling a zero carbon, lower-cost energy future. The second is a clean energy business. And it has developed a technology that converts non-recyclable waste plastic and end-of-life-tyres into synthetic gas. 

Clean energy investment trusts

Those who prefer to invest in investment trusts also have plenty of options. One of the best UK renewable energy investment trusts, in my view, is the Renewables Infrastructure Group. It’s a FTSE 250-listed trust that owns a broad portfolio of wind and solar farms in the UK and Europe. It aims to provide investors with regular dividends and has a trailing yield of about 5%.

There are more, of course. Other investment trusts with a focus on renewable energy include Bluefield Solar Income Fund, Greencoat UK Wind, and Greencoat Renewables.

Investing in renewable energy

As you can see, we really do have lots of options when it comes to UK renewable energy stocks.

But it’s important to understand that (like any other emerging industry) there are risks associated with the sector. Not all technologies are proven. And the stocks can be volatile.

So how would I approach this type of investment? I think the best strategy when investing in renewable energy is similar to investing in many sectors. I’d spread any capital over a number of different stocks and investment trusts. That way, stock-specific risk can be minimised.

The post UK renewable energy stocks: here’s how I’d invest appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

If sustainable investing is something that interests you, it’s easy to start this way. These days, there are plenty of actively-managed funds and exchange-traded funds (ETFs) that invest on a sustainable basis. And some have performed very well, outperforming major stock market indices over time.

With that in mind, here’s a look at a selection of sustainable funds and ETFs I like.

Sustainable investing funds

Whether you’re looking for UK equity exposure or global equity exposure, you’ve plenty of options when it comes to sustainable investment funds. Funds I hold in high regard include:

• Royal London Sustainable Leaders. This invests in businesses that are deemed to make a positive contribution to society. It invests predominantly in UK businesses but also has a little bit of exposure to the US and Europe. It has returned about 30% over the last three years (vs -7% for a FTSE 100 tracker).

• Liontrust Sustainable Future Global Growth. This seeks to identify companies around the world that not only have strong growth prospects but also offer products or services that make a positive contribution to society. Over three years, it’s returned about 61% (vs 25% for a FTSE All-World index tracker).

• Janus Henderson Global Sustainable Equity. This aims to invest in companies whose products and services are considered by the investment manager as contributing to positive environmental or social change. It’s delivered a return of about 50% over three years.

• BMO Responsible Global Equity. This only invests in companies whose products and operations aren’t considered to be harming the world, its people, or its wildlife, and are making a positive contribution to society. It has returned roughly 44% over three years.

• Fundsmith Sustainable Equity fund. This is a relatively new fund from the team at Fundsmith. It has a similar philosophy to that of Fundsmith Equity but won’t invest in businesses in certain sectors, such as Alcoholic Beverages or Tobacco. It’s performed well since launch, easily beating its benchmark.

Sustainable ETFs

If you prefer to invest in ETFs, which are generally more cost-effective than actively-managed funds, here are some options to consider: 

• The iShares Dow Jones Global Sustainability Screened UCITS ETF. This ETF offers exposure to a broad range of global companies that have been screened for their economic, environmental, and social characteristics. It screens out companies involved in industries such as alcohol, tobacco, gambling, firearms, and adult entertainment. It’s returned about 6% per year since its inception in 2011.

• The iShares MSCI World SRI UCITS ETF. This ETF aims to provide access to global markets through companies with outstanding ESG ratings and minimal controversies. It screens out companies involved in the oil & gas, weapons, tobacco, firearms, alcohol, and gambling industries. It has returned about 10.2% per year since its launch in 2017.

As you can see, investors have plenty of options today when it comes to sustainable funds and ETFs. My advice, if you’re keen to invest in sustainably, is to spread your money over a few different funds, or ETFs, in order to reduce your risk.

The post Sustainable investing: I think these are some of the best ETFs and funds to invest in appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Edward Sheldon has a position in Fundsmith Equity. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Interest in sustainable investment strategies – which seek to generate a financial return while also considering environmental, social, and governance (ESG) factors – has increased significantly too. For example, according to Morningstar, in 2019 sustainable investment funds in the US attracted flows of roughly $20.6bn – nearly four times the amount of flows in 2018.

Wondering how to invest sustainably in the UK? Here’s a look at three different ways to get exposure to sustainable companies. 

1. Sustainable investment funds

One of the easiest ways to invest sustainably is to put your money into an investment fund that has a sustainable focus. These kinds of funds are becoming increasingly prevalent. And many have performed very well in recent years, outperforming the market.

For example, the Investec UK Sustainable Equity fund, which was launched in late 2018 and invests in companies that are making a positive contribution to the future of society and the environment, delivered a return 33.6% last year, beating the FTSE 100’s return of 17.3% by a wide margin. Similarly, the Royal London Sustainable Leaders fund, which invests in UK businesses that are are deemed to make a positive contribution to society, outperformed the Footsie significantly as well.

Many sustainable investment funds with a global focus did well last year too. For example, the Liontrust Sustainable Future Global Growth fund returned 29.4% for the year, beating the 22.7% return from the MSCI World index comfortably. Meanwhile, the Janus Henderson Global Sustainable Equity did even better, returning 38.7% for the year.

These performances suggest that actively-managed funds can be an effective way of investing sustainably.

2. Sustainable ETFs and index funds

An alternative way of investing sustainably, however, is to invest in passively-managed exchange-traded funds (ETFs) or index funds that have a sustainable focus. The advantage of these funds is that they are generally cheaper than actively-managed funds.

One example here is the UBS ETF (IE) MSCI United Kingdom IMI Socially Responsible UCITS ETF. This ETF returned 22.9% last year. Another example is the Legal & General Ethical Trust, which returned 28.8% in 2019. If you’re looking for global exposure, the iShares Dow Jones Global Sustainability Screened UCITS ETF is a popular choice among investors. This ETF returned 26.3% (USD return) last year.

3. Sustainable stocks

Finally, I’ll point out that it’s possible to construct your own sustainable investment portfolio by investing in companies that have sustainability at the heart of their philosophies.

Examples that come to mind include packaging giant DS Smith, which I own myself and which says that sustainability is the “foundation” of its overall business strategy; and Impax Asset Management, which specialises in sustainable investment management strategies.

Do your research, and there’s no reason you can’t construct a robust, sustainable portfolio that has the potential to deliver strong long-term returns.

The post How to invest in sustainable companies in the UK appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Edward Sheldon owns shares in DS Smith. The Motley Fool UK has recommended DS Smith. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

In the past, investing on a sustainable basis often meant sacrificing returns as plenty of these funds underperformed the market. However, in recent years, many have delivered excellent returns for investors. Here’s a look at two sustainable funds that have smashed the FTSE 100 over the last five years.

Liontrust Sustainable Future Global Growth

This Liontrust Sustainable Future Global Growth fund is a fund with a global focus, investing in a broad range of companies from around the world. However, it only invests in companies that meet the team’s rules for environmental and social responsibility. Liontrust’s investment process seeks to identify companies that not only have strong growth prospects, but also offer products or services that make a positive contribution to society. 

In recent years, this fund’s performance has been excellent. Over one year, it’s returned 17.4%, while over three and five years, it’s returned 58.9% and 103.9%, respectively. By contrast, the FTSE 100 has returned just 2.3% over the last year, and 25.5% and 33.1% over three and five years.

One of the reasons this fund has performed so well recently is that it has considerable exposure to the technology sector. However, the fund is also well diversified across many different sectors. Some of its top holdings include Alphabet (the parent company of Google), Autodesk, which makes architecture and construction software, and Ecolab, which offers water, hygiene and energy technologies.

Overall, I think this fund could be a good portfolio addition for those looking to invest sustainably. Fees are 0.93% per year through Hargreaves Lansdown.

BMO Sustainable Opportunities Global Equity

The BMO Sustainable Opportunities Global Equity fund is another globally-focused fund that has performed well in recent years. It’s based on positive, sustainable investment themes, including ESG opportunities. However, it’s not limited to such themes and isn’t subject to negative screening or portfolio exclusions, so it may not be as focused on sustainability as some other funds in the sector. Its goal is to achieve medium- to long-term capital growth, with some income.

Over a one-year investment horizon, the BMO Sustainable Opportunities Global Equity fund has returned 12.5%, while over three and five years, it’s returned 55.1% and 82.8%, respectively. Again, it’s outperformed the FTSE 100 by a wide margin due to its global focus and exposure to the US technology sector. There are plenty of interesting ‘green’ names in the portfolio, such as water technology group Xylem.

All in all, I see this fund as a solid pick in the sustainable sector. It’s also available on the Hargreaves Lansdown platform with an annual fee of 1.29%.

The post I like these 2 ‘sustainable’ investment funds that are smashing the FTSE 100 appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Edward Sheldon owns shares in Alphabet. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Alphabet (C shares). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.