China and the U.S. find themselves in a deadlock regarding carbon emissions after a meeting between U.S. climate envoy John Kerry and his Chinese counterpart. This setback in curbing climate change brings to light the exciting opportunities for companies that provide equipment to address this pressing issue.
Although talks this week didn’t result in a major climate agreement, both parties agreed to engage in intensive discussions leading up to crucial climate negotiations later this year.
According to Alex Wang, a professor of law and faculty co-director at the Emmett Institute for Climate Change and Environment at the UCLA School of Law, this commitment to ongoing dialogue represents a modest outcome. He emphasizes that while it’s essential for the two sides to resume talks, they alone won’t suffice. The real progress lies in individual countries taking swift action to decarbonize.
Amidst the discussions and the alarming rise in global temperatures, one positive outcome becomes apparent: the demand for innovative solutions offered by clean-tech companies. Last year, Morgan Stanley identified a list of stocks known as “Earthshots.” These are groundbreaking technology companies that contribute to accelerating decarbonization efforts or mitigating global warming.
Since then, certain Earthshots—companies characterized by radical innovation and critical thinking—have experienced significant growth, while others have faced decline. Therefore, investors must exercise discernment in their selection process.
Top Picks: Siemens, Occidental Petroleum, and Sunrun
Morgan Stanley has identified three companies as its top picks in a recent report. These companies are Siemens, Occidental Petroleum, and Sunrun.
Siemens: Leading the Earthshot Revolution
Siemens, a European industrial company (ticker: SIE. Germany), is being hailed by Morgan Stanley as the preferred play on the Earthshot thesis. The bank praises Siemens for its extensive knowledge in automation, climate mitigation, and energy efficiency. With its position as the world’s largest automation company and one of the top players in electrification, Siemens is noted for its “smart infrastructure” division.
Siemens’ U.S.-listed American depositary receipts (SIEGY) have seen a 22% increase this year, reaching $83.80 per share.
Occidental Petroleum: Making Strides in Carbon Neutrality
Occidental Petroleum has emerged as a major player in the carbon capture space, an area gaining significant attention in efforts to limit greenhouse-gas emissions and combat global warming. This technology involves capturing carbon dioxide from industrial processes and securely storing it underground in rock formations. Berkshire Hathaway has also taken notice, increasing its stake in Occidental Petroleum to just over 25% of the company last month. The stock, however, has experienced a 4% decline this year.
Sunrun: A Leader in Solar Power
Sunrun, the largest rooftop solar company in the United States, offers homeowners an affordable alternative to traditional power sources by selling and leasing solar panels. Despite being part of one of the fastest-growing industries in the U.S., Sunrun has faced challenges this year, with its shares declining by 10%.
Morgan Stanley believes that the rapid adoption of electric vehicles will bring significant value to Sunrun. In fact, the bank suggests that EV customers embracing rooftop solar could generate as much value for Sunrun as its entire current business.
These three companies have been identified as top picks by Morgan Stanley due to their strong positions within their respective industries and their potential for growth. As the world continues to prioritize sustainability and the fight against climate change, Siemens, Occidental Petroleum, and Sunrun are well-positioned to capitalize on these emerging opportunities.