Green Giants: 7 ESG Stocks Leading the Way in Sustainable Investing

Stocks to buy

The surge in interest in ESG stocks among millennials and Generation Z is effectively reshaping the investment landscape. Firms ignoring ESG principles risk major backlash as ethical considerations become imperative in business. This shift reflects a broader societal change where making money without ethical standards is no longer acceptable.

Moreover, the ESG criteria are now seen as vital for assessing company risks, not just for screening out undesirable sectors. However, this approach has its critics, who argue it misses opportunities in sectors including fossil fuels and pushes investments towards liberal social goals. Despite the debate, ESG investing’s popularity is on the rise and this trend highlights a growing commitment to integrating financial acumen with social responsibility.

ESG Stocks: Microsoft (MSFT)

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Microsoft’s (NASDAQ:MSFT) journey through 2023 has been nothing short of amazing, solidifying its status as a top AI stock entering the new year. The tech giant’s early and substantial investments in generative AI have positioned it at the vanguard of the AI revolution. Moreover, the strategic foresight is not just a testament to Microsoft’s innovation but effectively aligns with CEO Satya Nadella’s vision of raising annual revenues to a staggering $500 billion by 2030.

Simultaneously, Microsoft’s dedication to ESG principles has earned it accolades as one of the top ESG stocks. Its comprehensive sustainability initiatives, marked by massive reductions in carbon emissions and the promotion of ethical AI practices, set it apart. Furthermore, Microsoft aids its customers in achieving environmental goals through its digital platforms focused on sustainability. These efforts, coupled with ambitious targets including becoming carbon-negative and achieving zero waste by 2030, underscore its obligation to environmental stewardship and societal well-being.

Ormat Technologies (ORA)

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Ormat Technologies (NYSE:ORA) is a giant in the field of renewable geothermal energy technology, making notable strides in its niche. The company’s achievements include constructing more than 190 power plants and installing more than 3,200 megawatts (MW) of capacity.

Ormat stock has fallen out of favor with investors, though, declining 12% year-to-date (YTD). However, the future looks promising as the company is poised to gain momentum in a more favorable environmental and economic landscape. In its recent third-quarter financial results, Ormat Technologies reported non-GAAP earnings of 47 cents per share, surpassing expectations by nine cents. Although its revenue of $208.1 million, marking an 18.3% increase year-over-year (YOY), fell slightly short of projections by $0.29 million, the company’s overall performance remains impressive.

Looking ahead, Ormat Technologies is optimistic, anticipating to conclude the year ahead of consensus estimates. The projected total revenues range between $825 million and $838 million, compared to the analyst estimate of $829.42 million. This forecast not only reflects the company’s operational strength but also indicates a potential rebound and growth trajectory for its stock, making it an intriguing prospect for investors prioritizing sustainability and innovation.

ESG Stocks: Fluence Energy (FLNC)

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Fluence Energy (NASDAQ:FLNC) is carving out a niche in the energy storage sector, bolstering the burgeoning electric vehicle (EV) market through its powerful energy storage solutions and AI-driven energy management systems. These competencies are critical for the development of efficient EV charging infrastructure and the integration of renewable energy into the power grid. Additionally, with a substantial cash reserve of $416 million, Fluence is well on its way to achieving positive adjusted EBITDA by the fiscal year 2024.

In the face of stiff global competition, particularly from Chinese counterparts, Fluence has managed to maintain its leadership in the U.S. market. This success is largely attributable to its domestic manufacturing capabilities and a key contract with AESC, positioning it as a top pick among EV-related stocks. Furthermore, the company projects its revenue to be in the range of $2 billion to $2.1 billion for the fiscal year 2023 and expects sales to rise by 35% to 40% in the following year. This optimistic outlook underscores Fluence’s potential as a key player in the energy storage and EV market, making it a compelling, sustainable option.

Bunge (BG)

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Bunge (NYSE:BG) is somewhat of an underappreciated player in the agricultural sector, which excels in connecting farmers with consumers. Operating in agribusiness, refined & specialty oils, and milling, the company profits mainly from agribusiness. With a presence in 40 countries, Bunge is positioned remarkably well amidst growing global food shortage concerns, and its business model champions sustainable food supply chains by supporting agricultural communities efficiently.

Despite previous financial challenges, Bunge projects a brighter future. The agribusiness segment is expected to replicate last year’s success, exceeding initial forecasts. Refined and Specialty Oils aim to outperform both previous estimates and last year’s results. Milling should meet projections, albeit possibly falling short of last year’s performance. Collectively, these segments indicate a positive direction for Bunge. Moreover, Bunge is financially attractive, trading at just 0.2 times forward sales, 79% below the sector median. It offers a forward dividend yield of 2.61%, with a notable 22-year history of consistent dividend payments, highlighting its commitment to shareholder returns.

ESG Stocks: Altus Power (AMPS)

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Altus Power (NYSE:AMPS) is a key player in the solar energy space, which is elevating its game with Atlus IQ, an AI-powered, cloud-based tool revolutionizing energy usage insights and solar savings. Offering real-time monitoring and effective portfolio integration, this innovation is poised to accelerate Altus Power’s growth at a rapid pace.

Financially, Altus Power stands out with a YOY revenue growth of 54%, far exceeding the sector median of roughly 6.9%. Despite not being undervalued due to its recent growth spurt, the company’s profitability margins are notably attractive. With a trailing twelve-month net income margin of 58% and gross margins at 82.35%, Altus is in a prime position to invest robustly in research and development, as well as capital ventures.

As AI trends continue to bolster the energy sector, Altus Power is on track to become a leading force in solar energy. Its blend of technological innovation and solid financial performance marks it as a compelling investment in sustainable energy’s future.

NextEra Energy (NEE)

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NextEra Energy (NYSE:NEE), with its unique positioning as both a leading utility company and a solar and wind energy pioneer, presents a fascinating investment opportunity. The company’s hybrid nature enables it to effectively harness the stability of a utility firm while capitalizing on the growing renewable energy sector. Recent economic shifts, particularly high bond yields, have cast a shadow over utility firms and their dividends. However, this situation presented NextEra Energy as a strong contrarian choice, especially given its dividend yield consistently above the 2.5% mark.

Furthermore, as the economic landscape undergoes cyclical changes, with rate cuts anticipated in 2024, the company’s strategy and market position become even more relevant. Amid these shifts, NextEra Energy has consistently delivered earnings that comfortably surpassed consensus and analysts’ expectations. While the clean energy sector is rife with exciting growth opportunities, NextEra Energy distinguishes itself as a stable income source with significant upside potential.

Host Hotels & Resorts (HST)

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Host Hotels & Resorts (NASDAQ:HST) is last on the list of ESG stocks to buy. It’s a distinguished real estate investment trust (REIT), which continues to make strides in the luxury and upper-upscale hotel market. With an enviable portfolio boasting names such as Grand Hyatt, Hilton, Marriott, and others, the company has established itself as a heavyweight in the hospitality sphere. What sets this company apart, however, is its unwavering commitment to ESG principles, a cornerstone of its corporate responsibility program. HST’s aspiration to become net positive by 2050, supported by a well-defined 2030 roadmap for sustainability, underscores its progressive approach.

In addition to its ESG credentials, HST has demonstrated impressive financial performance. In the past 14 quarters, it has blown past its funds from operations (FFO) guidance 12 times, a testament to its operational excellence. The latest earnings call brought more good news, with expectations of continued growth in 2024. Bookings for the next year have already witnessed a 15% bump compared to the last year. The financial allure of HST is further enhanced by its recent declaration of a 20 cents per share quarterly dividend, marking an 11.1% increase from the prior dividend of 18 cents per share. Additionally, its forward yield stands at an attractive 2.9%, while its stock trades at just 2.7 times forward sales estimates.

On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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