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  • Market Outlook
  • clean energy
  • solar

Which UK green stocks could gain from emission cuts?

UK green stocks have had a mixed performance so far this year. Sustainable hydrogen company Powerhouse Energy Group’s [PHE] share price, for example, may have gained 1,785% in 2020, but it has fallen 59.86% so far this year (as of 26 April’s close). Of the 10 UK green stocks included in money.co.uk’s Q1 best performers, only three managed to gain between January and March.

However, these companies could see their fortunes change as world leaders pledge to cut greenhouse emissions. Most recently, Joe Biden upped the US’s commitment to cutting emissions at a virtual summit of world leaders to coincide with Earth Day last week 

The UK has been no slouch either, with the government setting the world’s most ambitious target — a 78% cut in emissions by 2035 compared to 1990. For the first time, this target will also include aviation and shipping emissions, and will be enshrined into law at the end of June 2021. 

"The UK will be home to pioneering businesses, new technologies and green innovation as we make progress to net zero emissions, laying the foundations for decades of economic growth in a way that creates thousands of jobs," said Prime Minister Boris Johnson.

"The UK will be home to pioneering businesses, new technologies and green innovation" - Boris Johnson, UK Prime Minister

We look at the three best performing UK green stocks in the first quarter of 2021, according to money.co.uk, and ask where they could go next.

 

3 UK green stocks to watch

Good Energy

Good Energy’s [GOOD] share price has surged 28.85% since the start of 2021. As one of the UK’s leading renewable suppliers, the company reported £29m in gross profit in 2020’s preliminary results, although this was knocked down to £0.4m after COVID provisions and write-offs had been taken into account. 

Domestic customers slipped 4.7% to 132,000 year-on-year, but that was offset by a 9% growth in business customers. Good Energy’s share price has an average 287.5p price target from the analysts tracking the stock on Yahoo Finance. Reaching that level would represent a 23.92% upside on the current price.

 

Drax Group

Drax Group [DRX] is aiming to become carbon negative with no new gas generation at its Drax Power Station, the sale of remaining gas generation facilities and an end to commercial coal.

Drax Group’s share price is up over 10% this year and over 110% over the past 12 months. In 2020, adjusted EBITDA from continuing and discontinued operations grew £2m, to £412m, giving the company the confidence to up its dividend payout to 17.1p. 

110%

Drax Group's share price rise over the past 10 months

While the power company ended up making a loss last year, Simply Wall Street notes that for the past five years revenue has been growing 11% per year, and if it can maintain this revenue growth then “it’s likely profits will flow”. Among the analysts tracking the stock on Yahoo Finance, Drax has an average 419.22p price target — a 4.7% upside on its 26 April close.

 

Bluefield Solar

Bluefield Solar Income Fund [BSIF] is an investment company focused on the acquisition and long-term management of a diversified portfolio of low carbon assets in the UK. 

Following a shareholder vote in July 2020, Bluefield Solar is expanding beyond solar, moving into wind, hydro and battery storage. Historically, Blue Field invested in large-scale UK solar-energy infrastructure, but will augment this with minority investments in the wider renewable energy sector.

Bluefield Solar’s share price has been trading flat since the start of the year and is below its 132.29p 50-day moving average. However, as an investment fund, Bluefield offers an attractive dividend for investors, with a total distribution of 8p for the year ending 30 June 2021.

 

Beyond UK green stocks

On Earth Day, Joe Biden outlined an ambitious 2030 target of cutting US emissions by between 50% and 52% from 2005 levels. China, the world’s largest carbon emitter, aims to be carbon neutral by 2060. In total, 196 countries have now signed the historically and legally binding Paris Climate Agreement, with the US rejoining the fold this year.

196 countries

Have signed the Paris Climate Agreement

The solar theme was top of our leader board on 22 April, as Earth Day saw solar stocks shine. SolarEdge [SEDG] and Enphase Energy [ENPH] rose as much as 7.32% and 6.50% following Biden’s announcement, while the Invesco Solar ETF [TAN] has recorded 218.36% growth over the past 12 months (as of 16 April’s close).

So, whether investors favour UK green stocks or something more global, this is one investment area to watch

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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