Investing.com – Reducing greenhouse gas emissions has become one of the most important topics for investors, both because of the risks associated with the transition to a low-emission economy and because of the huge investment opportunities offered by decarbonization strategies and new technologies.
According to the International Renewable Energy Agency (IRENA), $131 trillion in investment is required to finance the energy transition needed to keep global warming below 1.5°C by 2050. This equates to an average annual investment of $4.4 trillion, or about 5% of the world’s gross domestic product (GDP).
“Renewable energy technologies today dominate the global electricity generation market, becoming the cheapest source of electricity in many markets,” recalls Anu Narula, head of global equity at Mirabaud AM (Geneva-based asset manager) in a research note.
Technologies, markets and business models are constantly changing, but Narula says companies that are able to find innovative solutions that can be deployed quickly and at scale will gain “significant long-term competitive advantage.”
Here are two companies that share manager Mirabaud says are at the forefront of their decarbonization ambitions:
Linde PLC (NYSE:) is the world’s leading industrial and engineering gases company. Its business model is to turn processed air and other gases into solutions that help customers improve their energy and resource efficiency.
For example, notes Narula, Linde’s hydrogen is helping refineries produce Ultra-Low Sulfur Diesel (ULSD), which helps improve air quality and therefore the environment and human health. Hydrogen is a key factor in the transition to clean energy.
If all projects are implemented, the Hydrogen Council estimates that total investment in clean hydrogen will exceed US$300 billion by 2030, equivalent to 1.4% of global energy funding. Linde currently has the world’s largest liquid hydrogen production capacity and the largest distribution network.
“Linde aims to quadruple its annual sales of hydrogen over the next 10-15 years. It has also committed to invest $1 billion through 2028 in decarburization initiatives, sponsoring technologies that reduce the cost of hydrogen (a major barrier to adoption in most countries) . and plans to triple production over the same period,” writes the head of Mirabaud.
Note that analysts are fairly bullish on Linde stock with 9 out of 11 analysts recommending a buy with an average target of €330.44, suggesting upside potential of almost 19% from the current price. Besides, InvestingPro Fair value of Linde shareswhich is based on a summary of financial models, is 308.69 euros, or 11% above the current price.
Gaztransport and Technogaz S.A.
Gaztransport et Technigaz SA (EPA:) is the world’s leading engineering company specializing in LNG transportation and storage. GTT is constantly working on new LNG storage technologies and solutions for other liquefied gases. The company has its own testing laboratory and actively participates in research, cooperating with engineering companies, research institutes, laboratories and universities. A large patent portfolio and continuous investment in research and development put GTT in a unique position in the market.
“GTT also offers new applications for the use of liquefied natural gas (LNG) as a fuel, a growing market,” says Narula in the analysis.
Demand for LNG is expected to continue growing beyond 2040, especially in Asia, where countries have limited domestic natural gas production and no pipeline transport infrastructure. “As LNG plays an increasingly important role in the energy transition, Gaztransport and Technogaz can benefit from the development of LNG-based technologies,” Narula notes in the study.
Note that analysts are moderately optimistic about the shares of “Gaztransport”. 5 out of 8 analysts who recommend buying, with an average target of 129.66 euros, which implies upside potential of almost 9% compared to the current price. On the other hand, the fair value of InvestingPro shares, based on the synthesis of financial models, is 100.17 euros, which is 15% lower than the current price.