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Finding renewable energy stocks around the world: Charts of the week

Lewis Jackson  |  13 Sep 2021Text size  Decrease  Increase  |  
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The Australian market is best known for its rich banking and mining sectors, but what about renewable energy or green transportation? While local industries are growing, investors also need to look offshore for quality opportunities.

To kick off global equity week, we’ve scoured global exchanges for the countries with the most opportunities in these two areas.

We screened the Morningstar database for companies with a market capitalisation north of $US5 billion that also generated at least 50% of their revenue from one of two Sustainalytics categories: “renewable energy” or “green transportation”. Sustainalytics is a Morningstar company and a leading global provider of sustainability ratings.

The market capitalisation screen excluded many volatile start-ups and new entrants. The revenue screen ensured a company's primary business is in the respective category.

A total of 17 countries made the list, ranging from Russia to Taiwan. The majority of companies came from China and the US.

While the Russian or Taiwanese stock exchanges may seem out of reach, Australian investors can still access many of the names via US markets. Many European and Asians firms maintain a dual listing in the US, with a structure called an American depositary receipt (ADR). It is similar to the Australian CHESS depositary interest (CDI) that Square will use to dual list in Australia.

Renewable energy is a broad church

Chinese and American firms dominate this space, making up almost half of the names. Chinese firms like Xinjiang Goldwind (02208) and LONGi Green Energy Technology (601012) are major players in wind and solar industries, respectively.

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Renewable energy is often associated with start-up founders and solar panels but almost half the companies generating most of their revenue from renewable sources today are utilities—good news for income investors.

Energy generators like New Zealand’s Meridian Energy (ASX: MEZ) and NextEra Energy Partners (NEP) in the US generate a majority of their energy from renewable sources.

Of the 62 firms from our screen, names under coverage include Spanish-German turbine manufacturer Siemens Gamesa Renewable Energy (SGRE) and US solar part manufacturer Enphase Energy (ENPH).

Going beyond electric cars

Green transportation is a wide category. Rail companies like Alstom SA (ALO), and Central Japan Railway (9022) rub shoulders with battery makers like Contemporary Amperex Technology (300750) and carmakers like Tesla (TSLA).

Rail manufacturers and operators represented around a third of the 23 firms thanks to the relative sustainability of rail transport.

Five car makers, four Chinese, one American, made the list. Tesla, Li Auto (LI), NIO (NIO), Niu Technologies (NIU) and XPeng (XPEV) are all pure play electric vehicle makers. Many of the world’s largest carmakers are absent because they continue to source significant revenue from their traditional combustion businesses.

For example, incumbents Toyota and Suzuki source around 15% of revenue from green transportation according to Sustainalytics data.

Names under Morningstar coverage include rail manufacturer Alstom and car maker Tesla, which is now trading in a range considered to be fairly valued. Alstom last closed at a 29% discount to fair value.

Is there a trend you'd like to see visualised? Get in touch.

is a reporter and data journalist with Morningstar. Tweet him @lewjackk or get in touch via email

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