Sustainable investing means buying stocks in companies that engage in activities that contribute to positive environmental outcomes. Being involved in renewable energy production, waste reduction, or making zero-emission vehicles are typical green stock characteristics. However, there are less headline-grabbing activities, such as low-energy intensity manufacturing, that should not be overlooked. For a sustainable investor though, just being green is not enough in itself. Returns are still important, and the company has to be financially viable.
There are thousands of stocks, and it might not be obvious which ones might be good green picks. So I have set out to save you some work. I present here three UK AIM-listed stocks that a sustainable investor might want to take a look at.
Don’t waste water
Wasting water is not environmentally friendly. Water Intelligence (LSE: WATR) helps its customers detect, find, and fix water leaks. At the moment the core business is American Leak Detection (ALD), which serves residential and commercial customers in the US, Canada, and Australia. A UK-based subsidiary, Water Intelligence International (WII), handles local government and utility customers.
Water Intelligence uses proprietary methods and innovative technology to detect leaks non-invasively. It also provides monitoring services for water companies to detect leaks in their customer’s homes. In addition, there is smart meter and sensor reading technology on offer for businesses to improve their water-use performance and costs.
As we have established, sustainable investing rewards green AND financially viable companies. Water Intelligence’s revenues have swelled from $8.84m in 2015 to $32.36m in 2019. Water Intelligence has also increased its net income, which has grown from $0.58m to $1.7m over the same period. Future growth opportunities include leveraging ALD’s regional reputation to sell WII’s services and vice versa. Then there are the calls for business to provide enhanced disclosure of things like water use which could make them increasingly turn to Water Intelligence for help.
Smart sustainable investing
Installing and managing smart electricity meters on behalf of UK suppliers and collecting a service charge is where Smart Metering Systems makes most of its money. Smart meters, by providing customers with real-time data, should help reduce energy consumption.
SMS has increased its revenues in each of the last five reported years and turned a profit in each of them. In March, SMS announced a partnership with a sustainable infrastructure fund whereby it fronts the capital for carbon reduction (CaRe) assets (like electric vehicle charging points and batteries for storage) and SMS manages them. The move into the energy management business looks promising given the UK’s net-zero by 2050 target. CaRe assets alongside a green electricity grid (and smart meters) will be key to getting there.
Building a sustainable future
Accsys Technologies takes sustainably-grown wood and through a proprietary process boosts the natural acetyl content of the wood. This creates wood that is more stable and durable and at least as good as alternatives that deplete resources or are highly energy-intensive to produce. In 2016 Accsys reported revenues of €52.77m. In 2020 they were €90.91m. The company was making losses from 2016 through 2019. but in 2020 has swung into a profit of €2.24m. Owing to strong demand for its products the company is opening plants around the world. The European manufacturing base is getting a new reactor. I think Accsys could make a welcome addition to a sustainable investing portfolio.
