The United Nations issued a stark warning on climate change yesterday with a call for immediate large-scale action on cutting emissions. The Intergovernmental Panel on Climate Change's report put the blame "unequivocally" on human activity and U.N. Secretary-General António Guterres said the findings were a "code red for humanity."
Some changes are already locked in, with Greenland's land-ice sheet expected to keep melting, leading to rising sea levels. Heat waves that occurred once in 50 years are now happening every 10 years. Currently, the Dixie Fire in California is now the second-largest wildfire in the state's history and could take weeks to contain. And the harshest heat wave in 30 years is leading to damaging wildfires across Greece and Italy.
There's a general acknowledgment on Wall Street that moving away from fossil fuels, the biggest cause of carbon emissions, will happen. Just look at the
performance of Tesla and the EV sector, but environmentally friendly investing hasn't paid off so far in 2021.
Green stocks in the red: Bloomberg's Cormac Mullen notes today the weak performance of the S&P Global Clean Energy Index
(NASDAQ:ICLN), which is down nearly 18% year to date and more than 30% since its peak in early January as President Joe Biden's inauguration approached. The MSCI World Index is up nearly 16% year to date and up more than 13% from ICLN's peak.
Among other clean energy ETFs, the Invesco MSCI Sustainable Future ETF
(NYSEARCA:ERTH) is down more than 10% year to date and nearly 20% off from the post-Biden election peak. The VanEck Vectors Low Carbon Energy ETF
(NYSEARCA:SMOG) and First Trust NASDAQ Clean Edge Green Energy Index ETF
(NASDAQ:QCLN) are down more than 2% year to date and about 16% off January highs.
Wall Street opportunities: Biden's recent executive order for 50% of cars to be EV by 2030 has
received the support of Detroit. And UBS notes that more than 50 large investors with $14T in investments have come together to call on companies to outline "net zero" commitments for 2050.
"The U.S. SEC may propose by year-end that listed firms report climate data and will also look at the criteria for investment funds claiming the sustainability or ESG label," UBS says. UBS says it sees carbon-neutral opportunities in autos, auto parts, batteries, electric and electronic components and green tech.
"With the global race to win the EV market well underway, we expect growth to be exponential rather than linear," it adds. "By 2025, we think around 25% of new cars may be electrified. By 2030, the share may reach 60–70%."
Morgan Stanley says the bipartisan infrastructure bill "could set the stage for a potentially more substantive reconciliation bill - the Administration's first opportunity for meaningful climate legislation."
Yesterday it refreshed its "Decarbonization Playbook" of stocks rated Overweight or Equal Weight with "more direct exposure to legislative support," analyst Devin McDermott writes. Those stocks and themes include: "Air Products
(NYSE:APD) (OW; hydrogen & carbon capture), Archer Daniels Midland
(NYSE:ADM) (EW; carbon capture), Bloom Energy
(NYSE:BE) (EW; hydrogen and potentially carbon capture), CF Industries
(NYSE:CF) (EW; green/blue ammonia/hydrogen & carbon capture), Exelon
(NASDAQ:EXC) (OW; nuclear), Exxon
(NYSE:XOM) & Chevron
(NYSE:CVX) (OW; carbon capture, renewable fuels and/or hydrogen), Linde
(NYSE:LIN) (OW; hydrogen & carbon capture), New Fortress Energy
(NASDAQ:NFE) (OW; hydrogen), NextDecade
(NASDAQ:NEXT) (OW; carbon capture), Nutrien
(NYSE:NTR) (EW; green/blue ammonia/hydrogen & carbon capture), Occidental Petroleum
(NYSE:OXY) (OW; carbon capture), Plug Power
(NASDAQ:PLUG) (EW; hydrogen), Sunrun
(NASDAQ:RUN) (OW; solar), and Tesla
(NASDAQ:TSLA)(OW; EVs)." (
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