With environmental stewardship now viewed as a corporate requirement, investments in the top sustainable stocks in Canada have been on the rise.
According to Broadridge Distribution Insight, assets in ESG (environmental, social and governance) funds are poised to grow from approximately US$10 trillion today to more than US$30 trillion by 2030, creating a global tailwind for companies across the industry spectrum to innovate towards a greener future.
Catalysts motivating this demand include but are not limited to:
- U.S. corporate demand for clean power growing more than 100-fold in the past decade (American Clean Power)
- Worldwide energy consumption expected to grow by 50 per cent by 2050 (National Oceanic and Atmospheric Administration)
- Global investments in energy transition technology having reached a point-of-no-return at US$755 billion in 2021 (Bloomberg NEF)
- The need for investments in renewable energy to triple to reach the United Nations’ 2050 net-zero emissions goal (International Energy Agency (IEA))
- The IEA’s estimate that clean technology investments will surpass coal, oil and gas investments for the first time in 2023, amassing US$1.7 trillion and just over US$1 trillion, respectively, with renewables accounting for almost 95 per cent of the increase in global power capacity through 2026
- BlackRock, the world’s largest investment manager, taking a firm pro-ESG stance toward the companies it invests in
This brighter spotlight on environmentally conscious businesses, for which carbon emissions reduction represents a key operating factor, makes it imperative to highlight some of the top sustainable stocks in Canada for potential inclusion in your portfolio.
These small and micro-cap companies offer opportunities to not only restore nature and biodiversity, but also to collect attractive returns through value-added solutions to some of humanity’s greatest environmental hazards, including plastic products, mining, heavy industry manufacturing, and lack of expertise about how to tackle climate change’s effects on our shared world.
Backed by a truly global movement in its earliest stages, given how 2022 global emissions were at an all-time-high, investors stand to benefit from institutionalizing a new world order where every drop of water, mineral ounce and watt of electricity is infinitely recyclable.
Let’s dive in:
Good Natured Products
Good Natured Products (TSXV:GDNP) manufactures more than 400 plant-based products and packaging solutions with the goal of reducing our reliance on fossil fuels.
The company has achieved a CAGR of 111 per cent over the past four years thanks to numerous successful acquisitions, as well as national, regional and small business clients across 50 U.S. states and Canadian provinces.
Good Natured’s top-line revenue for 2022 surpassed C$100 million with approximately C$3 million in adjusted EBITDA and just under C$5 million in cash flow from operations.
Management believes that growing environmental regulatory pressure, its scalable supply chain and exponential U.S. demand for sustainable packaging will catalyze its capture of market share through this decade.
RecycLiCo Battery Materials (TSXV:AMY) recovers up to 99 per cent of cathode metals from used batteries and upcycles them into high purity, battery-grade materials.
Minviro independently verified the company’s patented, closed-loop, multi-tonne-per-day process’ generation of 62 per cent less CO2 than competing hydrometallurgical processes.
RecycLiCo’s solution also requires significantly less capital, involves less waste, and produces no intermediary products, which contributes to reduced battery price volatility and global net-zero emissions goals, positioning the company to play a meaningful role in electric vehicle proliferation.
With giga-sized battery factories popping up the world over, RecycLiCo sees its technology as an essential component of a green and zero-loss battery supply chain.
As an early-stage, pre-revenue company with market validation and interest from international players, investors would be best served by giving the company a deeper look before the retail herd catches wind of its cost-saving innovation.
See RecycLiCo’s official website for further analysis.
Vertex Resource Group
Vertex Resource Group (TSXV:VTX) is a specialist in integrated environmental solutions composed of equipment, industrial processes and professional consulting.
The company is dedicated to helping its clients achieve environmental compliance and optimally manage their waste and recycling capabilities through a focus on sustainability, clean energy and emissions reduction across the supply chain.
It has also been free cash flow positive since 2019, which should allow it to fund further growth in the pipeline, utility, telecom and government sectors, while pursuing new opportunities in maintenance, turnaround stories, industrial cleaning and environmental monitoring driven by 50 per cent insider ownership.
Learn more about the security of Vertex’s revenue, the majority of which is derived from clients’ stable operating, maintenance and reclamation budgets, by reading its investor presentation from August 2022.
Our final top sustainable stock in Canada is PyroGenesis (TSX:PYR), an industrial innovator whose advanced plasma processes are helping some of the world’s worst polluters turn their acts around.
The Montreal-based company applies its line of five electric plasma torches across solutions in metal powders, metal waste recovery, waste management and silicon and hydrogen generation with the goal of drastically reducing industrial emissions from their current 30 per cent share on a global scale.
While many of PyroGenesis’ solutions – including waste management, metal waste recovery and metal powders – have reached the commercialization stage, the long-term nature of its contracts and developmental nature of its remaining offerings have prevented investor confidence from building to sustainable levels, despite the attractive clients the company counts on its roster, including: a multi-billion-dollar iron ore pellet producer, a European chemical and energy conglomerate and a global aerospace company.
The current state of investor confidence translates to a loss of more than 92 per cent from its all-time-high, which, given what we’ve discussed, equates to a green light to conduct further research and validate the company as a value opportunity primed for exponential growth.
We also elaborated on the attractiveness of PyroGenesis shares as part of The Market Herald’s Leading Edge series.
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