It’s becoming increasingly difficult to open a newspaper without hearing something about the worsening climate crisis. In the past seven days alone, we’ve heard about floods sweeping through China and Germany and wildfires erupting in Siberia. And, closer to home, the Met Office issued an extreme heat warning for the first time ever last Monday.
Against this backdrop, it’s no surprise that responsible investing — Environmental, Social and Governance (ESG) — is booming. According to M&G’s Pru brand, some 46% of its clients have shown an interest in ESG investing, with one in two saying their appetite for sustainable investments (such as renewable energy stocks) has grown since the Covid-19 outbreak.
Describing the “dramatic” growth in the popularity of ESG investments, M&G said the trend “has largely been fuelled by the climate emergency, growing scrutiny of company practices”. It also noted that “some governments [were] adopting carrot and stick policies to change consumers’ and companies’ behaviours in line with their commitments to the international community”.
The FTSE 100 firm also said the pandemic “has prompted a re-evaluation of ‘what matters most’.” This has prompted a change in investors’ financial priorities and has certainly boosted my interest in responsible investing.
5.4% dividend yields!
There are a number of top renewable energy stocks I’m looking to buy to ride the ESG train. One of these is Greencoat UK Wind (LSE: UKW), an investor in onshore and offshore wind farms across the country. The FTSE 250 company has a strong track record of acquisitions and its appetite for splashing the cash remains undimmed. Kepler Trust Intelligence notes that Greencoat UK Wind has “a significant pipeline of assets that it has committed to buy”.
This UK share will play a critical role in helping the government reach its goal of carbon neutrality by 2050. And despite the threat that operating in a highly-regulated environment brings, I think stock investors like me could do well with it in the process.
One final reason I love Greencoat UK Wind — today, this renewable energy stock boasts a 5.4% forward dividend yield.
Another top renewable energy stock I’d buy
Invinity Energy Systems (LSE: IES) isn’t involved in the business of producing green energy. But its role as a manufacturer of vanadium flow batteries still makes it an exciting renewable energy stock to buy.
Energy storage systems like Invinity’s are essential in the production of wind, solar and tidal energy. They can capture generated energy and distribute it when the wind stops blowing and the sun stops shining. This ensures a constant supply of power.
Lithium-ion batteries are hugely popular for this purpose, but vanadium-based ones are quickly growing in popularity. This is due to their superior durability, greater safety profile, and better cost effectiveness over the life of a project. This explains why Invinity’s commercial opportunity pipeline increased an impressive 30% between early March and late May. That said, the vanadium flow battery market is likely to face intense competition from iron flow batteries going forward.
