After a slump throughout 2022 and 2023 — largely due to tighter monetary policy — sustainable energy stocks may soon surge again. In-development and installed renewables grew by about 10% to 3,609 gigawatts in 2023 and might serve as a leading indicator that the wider sector is set to boom.
But which sustainable energy stocks are best to bet on, considering what we know about the sector’s performance? Household solar is a losing proposition for most investors, as the sustainable energy segment’s competition is steep and margins are thin (before getting into ongoing sourcing concerns). Electric vehicle charging stocks face the same problem, and EVs themselves are better valued as either car companies like General Motors (NYSE:GM) or a manufacturer-meets-tech powerhouse like Tesla (NASDAQ:TSLA) rather than pure-play sustainable energy stocks.
These three sustainable energy stocks pivot around those pitfalls, with two offering unique (but risky) access to long-term sustainable energy trends, while the third is a stable giant offering private equity-like gains to anchor your portfolio.
Nano Nuclear Energy (NNE)
Nuclear energy is slowly and quietly undergoing a resurgence, and few sustainable energy stocks are as well-positioned to capture the imminent upside as Nano Nuclear Energy (NASDAQ:NNE).
At the end of May, the Biden-Harris administration announced a new series of initiatives to boost America’s domestic nuclear energy industry. The initial report points to the fact that nuclear power is (somewhat surprisingly) the nation’s largest clean energy producer, producing nearly 20% of last year’s total national energy. While there are few details about what the administration plans to do moving forward, they formed a Nuclear Power Project Management and Delivery working group to assess, create recommendations, and operationalize new nuclear initiatives.
To that end, Nano Nuclear Energy is unique among nuclear energy stocks — let alone sustainable energy stocks — as the company develops micro-sized, portable reactors to modulate and disperse nuclear energy opportunities more easily. The company’s stock hit public markets in mid-May; since then, shares have surged 33%. Though management doesn’t project full-scale systems deployment until 2030, Nano Nuclear could benefit big-time from the increased focus on nuclear energy as an alternative to other sustainable energy stocks.
Brookfield Renewable Partners (BEP)
If you want to capture a wide-ranging slice of the renewable energy sector — and private equity-like gains to boot — few sustainable energy stocks can top Brookfield Renewable Partners (NYSE:BEP). Brookfield Renewable is a management fund that owns a range of global sustainable energy companies across a diverse portfolio that includes wind, solar, and hydroelectric offerings.
Brookfield marked a major win last month after the sustainable energy stock entered a “first o -its kind global framework agreement” with Microsoft (NASDAQ:MSFT) to help the tech giant reach its net-zero goals by 2030. This agreement includes “100% of its electricity consumption, 100% of the time, matched by zero-carbon energy purchases.”
Brookfield’s financials are also robust and notable among the best sustainable energy stocks, considering the wider sector’s struggles post-ZIRP. The company’s first-quarter report included a 7.6% jump in funds from operations and a dividend distribution aligned with the company’s goal to offer “a sustainable distribution with increases targeted on average at 5% to 9% annually.” Brookfield Renewable’s current dividend yield sits at a respectable 5.1%, which, again, makes it a unique income-producing player compared to most sustainable energy stocks.
Stem (STEM)
Sustainable energy stock Stem (NYSE:STEM) blends two unique — and lucrative — sectors: sustainable energy solutions and artificial intelligence. Stem’s Athena software acts as an intermediary or control system between generators, grid power, distributed resources like solar farms, and battery energy storage to best direct resources while accounting for weather, energy pricing and more. That’s all built upon an artificial intelligence backbone that, at the end of the day, creates a self-managing series of sustainable energy solutions for a range of large-scale enterprise customers.
Though trading firmly within penny stock territory, Stem’s leadership has 10X ambitions. The company’s AI and the Future of Energy white paper points to a well-thought-out strategic plan about how AI integration will accelerate and create efficiencies across sustainable energy markets.
Like so many speculative renewable energy stocks, Stem’s major sticking point is its current lack of profitability. Likewise, the company’s cyclical sales nature adds a bit more variability than most would like. Still, the company is beyond its pre-revenue phase and has a growing portfolio of completed projects. While definitely a long-term, buy-and-hold sustainable energy stock like Nano Nuclear, adding Stem to your portfolio of sustainable energy stocks is a good way to capture emerging AI influence on the sector as it shows its strength within existing green physical infrastructure.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.