Green Investment - iO Charts

ENERGY

The energy generation and supply industry has traditionally been dominated by coal-, oil- and gas-powered plants that supplied the electricity needed by homes, offices and factories. When burning these materials to produce electricity, there is a high amount of CO2 and other gases that are released into the atmosphere that are detrimental to the health of people as well as the ecosystem of our planet. They are also non-renewable, meaning that we will, at one point run out of them, so even if they were completely harmless, we would need to switch over from them eventually.
Fortunately, we have technologies that can help us with this transition, including solar (photovoltaics and concentrated solar power), wind, hydro, geothermal and biomass among others. We decided not to include nuclear power in our list, as there are constant discussions as to whether it can be considered green (because of the nuclear waste it produces) and is not renewable (our uranium fuel supply is not limitless).
You will also find companies that work on making all of electricity generation, distribution and transport more efficient on our list, as we do not have to worry about where the electricity is generated if it does not need to be generated at all.
One of the biggest challenges that we face with this transition is the ability to store energy. As solar PV and wind power are becoming the most dominant sources of electricity in this new mix, we have to take into account that they generate electricity based on weather conditions. Our storage section explains the available options.
We also included utility companies that operate primarily (and in most cases exclusively) green energy generation technologies.
Industry ETFs
TickerName
TANInvesco Solar ETF
FANFirst Trust Global Wind Energy ETF
ICLNiShares Global Clean Energy ETF
QCLNFirst Trust NASDAQ Clean Edge Green Energy Index Fund
LITGlobal X Lithium & Battery Tech ETF
BATTAmplify Advanced Battery Metals and Materials ETF
Generation equipment
Solar PV
This is what is mostly referred to by people when talking about solar panels that generate electricity. Solar Photovoltaics (PV) is the conversion of light into electricity using semiconducting materials.
The basis of a system is the solar cell. The cell is the base building block that is capable of generating electricity from light. Manufacturers use different materials to make the cell, but the most common of these by far is silicon. In order to be able to install these on a rooftop (or a field, etc.), cells need to be arranged into modules (panels).
These systems are made up of:
  • Solar cells
  • Wiring to connect the cells and the modules so that there is a single access port to all of the electricity they generate.
  • Inverters are required to convert the DC (direct-current) power the panels generate into AC (alternating-current) that the electrical grid and most of our appliances use. Inverters and power optimizers also make sure that the maximum amount of power is generated and that the system can be shut down in case of failures by controlling the characteristics of cells.
  • Mounts and racking to be able to attach the panels to a roof or position them in a field
The following types of companies take part in the process:
  • Suppliers provide the raw material for cells (mostly polysilicon)
  • Solar cell manufacturers produce the cells
  • Component manufacturers provide the inverters/power optimizers, mounting equipment, cabling, monitoring and sun tracking systems, etc.
  • Residential, commercial installers and power utility companies deploy the modules and operate (or provide support for) the systems
In practice, a lot of the cell manufacturers take part in assembling the modules and even installing them.
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Wind
A wind turbine, or alternatively referred to as a wind energy converter, is a device that converts the wind's kinetic energy into electrical energy.
The smallest turbines are used for applications such as battery charging for auxiliary power for boats or caravans or to power traffic warning signs.
The bigger ones are used in wind farms, that consist of many individual wind turbines connected to the electric power transmission network.
Onshore wind farms are inexpensive, but have an impact on the landscape, as typically they need to be spread over more land than other power stations and need to be built in wild and rural areas, which can lead to the "industrialization of the countryside" and habitat loss.
Offshore wind is steadier and stronger than on land and offshore farms have less visual impact, but construction and maintenance costs are considerably higher.
Wind turbine manufacturers use different materials to design the structure and blades, most importantly glass fiber and carbon fiber.
We have included a section for companies that supply materials (mainly carbon fiber) to wind turbine manufacturers, but please note that in most cases this makes up only a small part of the operations of these companies.
Also, other than Vestas Wind Systems and Siemens Gamesa Renewable Energy, all organizations listed as manufacturers are conglomerates, where most of their revenue is derived from other sources.
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Hydro, CSP, geothermal, biomass and marine
Hydropower is power derived from the energy of falling or fast-running water. It has been around for a very long time and today accounts for roughly 15% of total world electricity production, which makes it by far the biggest source of renewable energy we have today. Hydro power plants can provide the base load energy required by countries, as the amount of electricity produced by the plants can be adjusted as needed.
Geothermal energy is thermal energy generated and stored in the Earth. This can be extracted and used for heating or for electricity production. This type of power generation is mostly restricted to places where sufficient heat energy can be extracted without having to drill very deep.
Biomass plants burn organic waste to produce electricity. Unlike most other sustainable sources of energy, a biomass power plant is not dependent on geography and waste is easy to come by anywhere.
CSP (Concentrated Solar Power) may be the latest of these solutions. These systems generate solar power by using mirrors or lenses to concentrate a large area of sunlight onto a receiver. There, it generates heat which can be used to power a turbine, which then produces electricity. Because of the amount of concentrated heat that is needed, only utilities build big farms and serve large areas with a single plant.
Marine power includes technologies that harvest wave and tidal energy.
We decided to put all of these technologies into the same list, as the main technology used in these is a generator and so if a company has expertise in designing electrical generators, then they are usually involved in most of these on some level.
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Energy storage
Energy storage is the capture of energy produced at one time for use at a later time. There are countless solutions that store energy and have been used for some time now (like pumped hydro, flywheels, etc.), but most of them have not proven economically feasible for large scale energy storage. A few of these solutions have been deployed, but not in large enough quantities for these to make up any meaningful contribution to the revenues of bigger corporations. In most places still, if backup power needs to be provided, diesel generators are used. In this section we included two technologies that are becoming more and more widespread, lithium-ion batteries and fuel cells.
Batteries
Li-ion battery technology is not a new invention, but it has been gaining popularity as its price has been declining rapidly.
Batteries store electrochemical energy, which can then easily be converted into electricity. Multiple types of batteries have existed for more than two centuries and have been used in appliances.
The typical battery has been small, just big enough to power our portable electronic devices, at maximum jump start car engines and power the radio.
But as photovoltaics, wind power and battery-electric vehicles started gaining popularity, the need for bigger and more efficient batteries has become stronger. As a consequence of investments in this field, the price of lithium-ion batteries has been steadily dropping, decreasing by 85% from 2010 to 2018.
The Battery and battery parts manufacturing section lists companies that manufacture batteries, other parts that are required in the manufacturing process or are working on promising new battery technologies.
In our Lithium supply list, we mostly included organizations that operate mines, and a substantial amount of their revenues come from mining and/or refining lithium.
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Fuel-cells
A fuel cell is an electrochemical cell that converts the chemical energy of a fuel (mostly hydrogen) and an oxidizing agent (mostly oxygen) into electricity.
They have been used to power satellites, provide back-up power to whole buildings, network infrastructure and lately in cars and trucks as well.
We decided to include only one vehicle manufacturer (Nikola Corporation), as basically all of the notable car companies have put money into researching FCEVs (Fuel Cell Electric Vehicles) and most of them have even built production vehicles, but it still makes up only a fraction of their revenues.
The companies in the fuel-cell ecosystem include:
  • Vehicle manufacturers
  • Fuel-cell manufacturers
  • Hydrogen producers
  • Companies that transport the hydrogen and operate fueling stations
In some cases, these activities are performed by the same company, as on-site production technologies already exist (where the fuel-cells are located and where the hydrogen will be used).
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Efficiency/Smart grid
A big challenge in the transition to a new-energy era is the way the power grid has been designed. For a very long time, electricity has been generated centrally in huge power plants and then distributed over long distances to towns and businesses.
With the rise of photovoltaics, wind, etc. it became possible to create smaller "plants" on the top of office buildings, even individual homes. Electricity generation is now becoming more decentralized, turning increasingly more consumers into producers. This requires the grid to be more flexible, to be "smarter" in how it distributes power, as it is no longer a one way exchange.
The fact that batteries are also becoming commonplace in individual homes, introduces the possibility of connecting these appliances to the grid and discharging them at the most suitable times.
In this section we are listing companies that manufacture appliances, write software or are involved in a meaningful way in making the power grid and electricity consumption more efficient.
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Utilities
Electric utilities operate power plants that generate electricity and sell that electricity to consumers.
These companies usually have lower growth rates, but very stable, consistent operations and usually distribute most of their earnings as dividends.
Renewables
In this section we only included companies that make their living from the operation of sustainable generation technologies like the technologies listed above.
Some of them may operate a gas or oil power plant, but we tried to exclude any companies that do not seem serious about turning much of their portfolio into green assets.
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Waste-to-energy
Waste-to-energy or energy-from-waste is the process of generating energy in the form of electricity and/or heat from the primary treatment of waste, or the processing of waste into a fuel source. Most Waste to Electricity processes generate electricity and/or heat directly through combustion, or produce a combustible fuel commodity, such as methane, methanol, ethanol or synthetic fuels. Electricity that is produced this way does not need to be generated from other sources, like coal, oil, etc. and waste in these plants is incinerated, so it does not need to be landfilled and does not get into the oceans and forests.
This section mostly includes companies that operate these incineration and generation plants.
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TRANSPORTATION
For more than a century, the transportation industry has been based on fossil fuels. Cars, buses, even airplanes are mostly using oil (and natural gas) as fuel.
In an effort to combat climate change, air pollution (and the fact that we are sooner or later running out of fossil fuels), environment friendly propulsion systems have been gaining ground.
The three defining alternatives to traditional propulsion systems are batteries, hydrogen fuel-cells and biofuels.
Neither of these technologies are new, but they were far from being accepted as an alternative for everyday use.
The reason why there are only car, bus and truck manufacturers in this section, is because the air and water transport industries are only in the early phases of the transition and there are not yet any bigger public companies that derive a meaningful portion of their revenue from these types of products.
Industry ETFs
TickerName
KARSKraneShares Electric Vehicles and Future Mobility Index ETF
DRIVGlobal X Autonomous & Electric Vehicles ETF
LITGlobal X Lithium & Battery Tech ETF
BATTAmplify Advanced Battery Metals and Materials ETF
Battery powered electric
Three types of battery powered electric vehicles are defined:
  • HEV (Hybrid Electric Vehicle) - A vehicle that is mainly powered by an ICE (Internal Combustion Engine), but it also has a small built-in battery pack.
    These cars have lower emissions and typically cost less to operate, as the car is using energy that would otherwise be lost during transport to charge the batteries, thus requiring less overall fuel.
    As it is shown on the chart above, HEVs make up the majority of battery powered vehicle sales, but their share in the mix has been decreasing.
  • PHEV (Plug-in Hybrid Electric Vehicle) - These vehicles are basically HEVs, but they can be plugged in and the battery can be charged. In essence, for shorter daily commutes, these cars do not have to use their combustion engine.
  • BEV (Battery Electric Vehicle) - BEVs use electric motors instead of combustion engines for propulsion. These are also referred to as pure electric.
    The most important drawback to these cars have traditionally been their price because of the huge number of battery packs that they require, as well their range and the time it takes to charge the batteries.
    However, with the price of Li-ion batteries falling sharply in recent years, these cars are now becoming affordable for everyday people. Their range has been greatly increased, public charging stations are rapidly being installed and the charge times are also much shorter.
    BEVs include - but are not limited to - motorcycles, bicycles, watercraft, forklifts, buses, trucks and cars.
Vehicle manufacturing
We decided that we would only include those manufacturers in this list that derive most of their revenue from electric transportation.
Because of this fact, you will not find any of the traditional manufacturers here, even though most of them now have BEVs, PHEVs and HEVs in their lineup.
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EV powertrain and charging infrastructure
For the mass adoption of electric vehicles, charging infrastructure needs to be deployed everywhere.
The capacity of the public stations will probably be much lower than what the current fueling station network can handle, as people will usually charge their cars at home, and only rely on these stations if they are on longer trips.
However, equipment is not only required for public stations, but for home charging as well. Charging cables with inverters and other accessories are required in each garage. Thus on the EV charging infrastructure market size chart the total number includes the publicly accessible, as well as home chargers.
This list also includes manufacturers of EV powertrains. EV powertrains are the foundation of the vehicle as they include all propulsion components, like the electric motors.
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Batteries
Batteries store electrochemical energy, which can then easily be converted into electricity. Multiple types of batteries have existed for more than two centuries and have been used in appliances.
The typical battery has been small, just big enough to power our portable electronic devices, at maximum jump start car engines and power the radio.
But as photovoltaics, wind power and battery-electric vehicles started gaining popularity, the need for bigger and more efficient batteries has become stronger. As a consequence of investments in this field, the price of lithium-ion batteries has been steadily dropping, decreasing by 85% from 2010 to 2018.
The Battery and battery parts manufacturing section lists companies that manufacture batteries, other parts that are required in the manufacturing process or are working on promising new battery technologies.
In our Lithium supply list, we mostly included organizations that operate mines, and a substantial amount of their revenues come from mining and/or refining lithium.
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Alternative propulsion
Our list includes hydrogen fuel-cells and biofuels. The adoption of these solutions is growing, but they seem to be taking the back seat to battery electric vehicles.
Buses, trucks, the public, the military, etc. all have their specific requirements for what a vehicle should be capable of, so the long-term simultaneous usage of all of these technologies is a possibility.
Fuel-cells
A fuel cell is an electrochemical cell that converts the chemical energy of a fuel (mostly hydrogen) and an oxidizing agent (mostly oxygen) into electricity.
They have been used to power satellites, provide back-up power to whole buildings, network infrastructure and lately in cars and trucks as well.
We decided to include only one vehicle manufacturer (Nikola Corporation), as bascially all of the notable car companies have put money into researching FCEVs (Fuel Cell Electric Vehicles) and most of them have even built production vehicles, but it still makes up only a fraction of their revenues.
The companies in the fuel-cell ecosystem include:
  • Vehicle manufacturers
  • Fuel-cell manufacturers
  • Hydrogen producers
  • Companies that transport the hydrogen and operate fueling stations
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Biofuels
A biofuel is a fuel that is produced through contemporary processes from biomass, rather than a fuel produced by the very slow geological processes involved in the formation of fossil fuels, such as oil. Biofuels can be produced from plants or from organic waste.
If the biomass used in the production of biofuel can regrow quickly, the fuel is generally considered to be a form of renewable energy.
In 2018, biofuels provided 3% of the world's fuels for road transport.
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Pollution control
No matter how fast alternative propulsion and green energy generation technologies gain ground, we still nearly exclusively use fossil fuel-based fleets and energy plants.
These assets will be with us for decades to come, so as long as pollution control technologies can be improved to work just 0.1% more efficiently, their impact is still huge and are worth the investment.
Most of the companies in the list below manufacture exhaust management equipment, but there are some, that are only involved in industrial pollution control and not in transportation.
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WATER MANAGEMENT
Having access to clean water is one of the most important needs of human beings, so companies that are involved in providing this resource will always have demand for their services.
Increasingly more water is consumed every year as it is shown on the graphs below.
Companies in this space generally do not have very rich valuations, as most of them are older, more established players. With some exceptions, most water stocks are suitable for risk-averse investors as they usually have stable, slowly growing revenues and earnings, while not being at risk of disruption.
Consumption is usually divided into three categories:
  • Agricultural - Water used for irrigation, drinking water for livestock.
  • Domestic - Water usage by households for drinking, cleaning, cooking, etc.
  • Industrial - Hydro power and water used for industrial processes in factories.
One thing that surely needs to improve is the amount of water that goes to waste. As shown on the charts, in some cases we waste 4 or 5 times more water than what we consume.
There is also a huge loss incurred with the evaporation of water from reservoirs, which exceeds our total domestic and industrial consumption.
The main goal of companies that operate in this sector is to provide clean water while losing as little amount of water as possible in the process. We divided these organizations into 4 distinct categories with possible overlaps existing among them:
  • Water treatment - Water needs to be cleaned to make sure it is safe for human consumption as well as for the environment when it is released back into lakes and rivers. Organizations that operate in this space manufacture water treatment equipment that they either use themselves or sell to other organizations that operate water treatment plants.
  • Utilities - Utilities operate the water transport infrastructure like water pipes, water towers, public taps and make sure that we have water flowing out of the tap in our house.
  • Efficient water transport and infrastructure - These companies focus their effort on creating solutions that minimize water loss and energy usage and maximize efficiency throughout the whole system.
  • Irrigation - Agricultural water usage makes up a huge portion of our overall water usage, so efficient irrigation techniques are vital. This mainly includes irrigation pipes, machines and farm infrastructure.
Industry ETFs
TickerName
PIOInvesco Global Water ETF
PHOInvesco Water Resources ETF
CGWInvesco S&P Global Water Index ETF
FIWFirst Trust Water ETF
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WASTE MANAGEMENT AND POLLUTION CONTROL
Landfills are filling up, sites in nature are polluted by industrial processes and the air quality is a serious issue in many places in the world. There are multiple new approaches to how we can handle these issues, but in most cases it is still economically justified to use processes that pose a burden to the environment and to communities. Investments into companies that undo, or avoid the damage that we do to our environment is vital. We defined four main areas in connection to this topic:
  • Recycling - Materials, like plastics, glass, paper, metals, etc. are reused in new products, so these base materials do not need to be mined, processed, or cut again, and do not add to the already huge landfills.
    In this list we included companies that operate recycling plants, as well as the transport of these materials from residential and non-residential areas.
  • Waste-to-Energy - Waste-to-energy or energy-from-waste is the process of generating energy in the form of electricity and/or heat from the primary treatment of waste, or the processing of waste into a fuel source. Most Waste to Electricity processes generate electricity and/or heat directly through combustion, or produce a combustible fuel commodity, such as methane, methanol, ethanol or synthetic fuels. Electricity that is produced this way does not need to be generated from other sources, like coal, oil, etc. and waste in these plants is incinerated, so it does not need to be landfilled and does not get into the oceans and forests.
    This section mostly includes companies that operate these incineration and generation plants.
  • Waste cleanup - Certain industrial processes leave the area where they work contaminated with all sorts of hazardous materials. Companies that specialize in waste cleanup are contracted to remove toxic waste and transform the enviroment back to its original state.
  • Air Quality - Here you will find organizations that work to reduce emissions and filter pollutants from cars, factories and other sources.
Industry ETFs
TickerName
EVXVanEck Vectors Environmental Services ETF
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OTHER
This section includes smaller categories of companies that contribute to sustainability in different ways.
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