Four climate change winners and one big loser

In November 2022, I highlighted five shares doing their bit to save the world from climate change. Eighteen months on, one of the companies has risen by more than 65% and three are humming along nicely, but another has received a de-listing notification from Nasdaq.

Granted, this is a look at only short-term performance, but on the eve of Earth Day 2024, “the anniversary of the birth of the modern environmental movement in 1970”, according to the organisation behind it, I take a closer look at those five firms, and examine a few others that could help society deal with a changing climate.

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Arcadis

First up is innovative engineering firm Arcadis NV (EURONEXT:ARCAD), which has a market cap of €5.3 billion (£4.5 billion). Its shares are up 67% since I looked at it in 2022. Arcadis’ projects include the “sponge cities” of Wuhan, which I wrote about last time, but to give you more of a flavour of its work, we can look at activities a bit closer to home, in Europe.

The company is at work in the Dutch city of Utrecht, for example, helping renovate the sewage and water management systems, which won’t be able to cope with extreme weather caused by climate change. Meanwhile, in Paris, it is helping create five “urban forests” by planting 170,000 trees in concrete spaces to keep the French capital cooler and preserve quality of life for residents.

Emmanuel Grégorie, the deputy mayor of Paris, says: “Trees play a major role in capturing carbon dioxide and helping fight the heat. Those familiar with woodlands know that the temperature is always several degrees cooler.”

Last year, television news network France 24 reported that Parisians face the highest risk of heat-related deaths in Europe, according to research in The Lancet. Some of this, the article said, is owing to the “urban heat island effect”. Last summer, the temperature was above 40C for several weeks.

It’s hard to imagine that we’ll stop needing the solutions of firms such as Arcadis, which employs 36,000 people including architects, data analysts, designers, engineers, project planners, water management and sustainability experts.

In its full-year results, chief executive Alan Brookes, who was appointed in May last year, said: “Arcadis has delivered a record-breaking fourth-quarter and full-year 2023 performance, achieving all its key 2021-23 strategic targets.” Revenue was €3.8 billion, up 25% year on year.

Xylem

On to another positive outcome. International water technology firm Xylem Inc (NYSE:XYL) is up 17.4% compared to 18 months ago, although its performance over the period has been volatile.

In February, Xylem reported a 33% increase in annual revenue to $7.4 billion (£5.8 billion).

In a note from Morningstar at the time, one analyst said: “We think Xylem is poised to benefit from long-term trends, including global population growth, water scarcity in developing countries, and the need to replace ageing water infrastructure in developed countries.”

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The company acquired Evoqua Water Technologies last year, which it described as “a leader in mission-critical water treatment solutions and services”.

“Global awareness of water as a systemic risk to society has never been greater,” said Patrick Decker, president and CEO of Xylem. “Investment in water solutions continues to accelerate as communities and businesses around the world address intensifying challenges like water scarcity, quality and resilience to climate change – and how to address these issues in an affordable way.”

EZGO Technologies

Now let’s turn to EZGO Technologies Ltd Ordinary Shares (NASDAQ:EZGO), which provides a salutary lesson in not betting the farm on one micro-cap share. Its shares are down 88.4% compared to 18 months ago.

The Chinese company, which IPO’d on Nasdaq in 2021, designs, manufactures and sells two- and three-wheeled electric vehicles.

In its 2023 results, the chief executive cited “intensified competition, especially in the e-bicycle sector” after announcing revenue of $15.9 million (£12.5 million), down 8.4%.

Last year, Nasdaq informed EZGO that its minimum closing bid price per share for its ordinary shares was below $1.00 for 30 consecutive business days and it was given 180 days to regain compliance. Nasdaq listing rules state that a share must have a bid price of at least $1 per share. A one-for-40 reverse share split increased the share price and allowed EZGO to maintain its listing. Lee Wild, ii’s head of equity strategy, explains share splits here.

And this week, EZGO entered into a five-year strategic cooperation framework agreement with Chinese firm Woteam New Energy, which focuses on batteries for electric bicycles, robots and photovoltaic energy storage.

Ingredion

Back to another example of positive performance. Ingredients providerIngredion Inc (NYSE:INGR), with a market cap of $7.5 billion, is up 20.7% compared to 18 months ago.

It’s benefiting from consumer appetite for plant-based dairy and meat alternatives, and it’s not just those who are allergic to dairy or vegetarians who are driving demand. I know several people who prefer the taste of oat milk in coffee, or who would rather eat a sausage made of plants than pigs. Sure, this is only anecdotal evidence, but I’ve also eaten in the likes of Mallow and Mildred’s, both small restaurant chains in London whose vegan offerings look and taste as good, to me at least, as meat-based version. These aren’t restaurants tucked away down mouldy back alleys. Branches are in locations including Canary Wharf, Covent Garden and Borough Market. Anyway, I digress.

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Ingredion, which is headquartered in Chicago, serves customers in nearly 120 countries and employs about 12,000 people.

Jim Zallie, president and CEO, said: “Our business performed exceptionally well and remained resilient throughout 2023, delivering more than 20% operating income growth for both the fourth quarter and full year.” 

GSK

Cameroon was the first African country to receive a shipment of GSK (LSE:GSK)’s Mosquirix vaccine – the world’s first malaria immunization – late last year, according to Reuters.

Malaria is not the only disease that could spread as our planet warms. The FTSE 100 firm says that “studies show that due to the changing climate, dengue, malaria and other diseases spread by mosquitoes are expanding their range, gradually emerging in unaffected areas or re-emerging in regions where they had subsided for decades”.

The GSK vaccine isn’t the only malaria vaccine provider. The University of Oxford’s R21/Matrix-M jab has been approved by the World Health Organisation (WHO) for the prevention of the disease in children.

The vaccines arm of GSKis just one area of its business, of course, and as ii equity analyst Keith Bowman said in coverage of the firm’s full-year results for 2023, the “pressure to develop new blockbuster drugs is a constant across the pharma industry”. Revenue was up 5% in 2023 to £30.3 billion.

In terms of its performance over 18 months, GSK is up 14.2%.

More stock ideas for a warmer planet

Pest control specialists

Rising temperatures could lead to more pests, by lengthening their breeding season and causing them to expand geographically.

As FTSE 100 stock Rentokil Initial (LSE:RTO) puts it, “as most pests are more prevalent in warmer climates, the impact of climate change could be potentially devastating to public health and food production”.

As well as health risks, pest can damage crops and property, not to mention most people’s natural disgust when it comes to bugs.

“Pests have been with us since the beginning of time, and they will be with us until the end of time”, Andy Ransom, CEO of Rentokil, said in a recent podcast interview. Ransom, whose firm has been hired by Libya to deal with bubonic plague, said that there is no doubt that increasing temperatures are impacting pests.

He added that a warmer climate is “altering the breeding season of flying, biting, crawling insects. If it’s hotter, you tend to see the season start earlier and it goes on a bit longer.” Is your skin crawling yet?

Across, the Atlantic, is US pest control business Rollins Inc (NYSE:ROL), which Bloomberg referred to as the “Nvidia of the pest-control industry” last summer. Rollins, headquartered in Atlanta, Georgia, declares itself “recession-resistant”, explaining that more than 80% of revenues are “contractual recurring”.

In a video interview with ii last year, Keith Ashworth Lord, manager of the CFP SDL UK Buffettology General fund, said: “I spend some of my time in Florida, and if we didn’t have our house regularly debugged, like every month, we’d be overrun. But it’s not just residential, it’s commercial. You can get shut down if you have rats in the kitchen.”

He owns stock in Rollins, as does James Thomson, manager of Rathbone Global Opportunities fund, which he mentioned when my colleague Kyle Caldwell interviewed him last month.

Air-conditioning shares

When it’s a 40C heatwave, most of us desire air-con, either in our homes, schools, hotels, or workplaces. Global demand is likely to surge owing to climate change.

However, the extra electricity needed to power a mushrooming number of air-con units creates more emissions. The New York Times recently reported on December’s United Nations climate talks in Dubai, citing a UN report that said if current trends hold, 10% of the world’s greenhouse gas emissions in 2050 could come from air-conditioning and other efforts to keep cool.

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Yet the NYT article did suggest that “passive cooling”, such as “reflective surfaces”, faster improvements in the energy efficiency of new air-con units and “a more stringent phase-out of high-polluting refrigerants” could cut projected emissions. The transition to clean energy sources is also a factor to consider.

Two companies focusing on air-con include $10.9 billion Texas-based Comfort Systems USA Inc (NYSE:FIX) and Trane Technologies Class A (NYSE:TT), a $67.4 billion with its HQ in Ireland.Both stocks are listed in the US.

Comfort Systems shares were $57.59 five years ago and have since risen by 420% to $299.64 today. Its projects are mainly for commercial, industrial and institutional buildings, and are focused on HVAC (heating, ventilation, and air conditioning).  

Trane Technologies, meanwhile, makes and services commercial and residential HVAC systems and refrigeration solutions. It has worked on landmarks including New York’s Grand Central Station and the world’s tallest building, the Burj Khalifa tower in Dubai. Its share price has risen from $87.50 five years ago to $293.09 today, a rise of 235%.