Best Carbon Credit Stocks for 2024
As concerns about climate change and global warming rise, the demand for sustainable investment options is increasing. Carbon credit stocks and carbon credit ETFs have emerged as a popular choice for environmentally conscious investors.
In this article, we will explore what carbon credit stocks are, highlight the top carbon credit stocks and ETFs to watch, and provide insights into the benefits and risks associated with them.
Table of Contents
What are Carbon Credit Stocks?
Carbon credit stocks are shares of companies involved in the processes around the creation, selling and management of carbon credits. Carbon credits, also known as carbon offsets, are certificates that represent a certain amount of greenhouse gas emissions. They can be used to reduce greenhouse gas emissions in multiple ways.
Carbon credits are usually given out by government-owned emission trading systems. The idea is that companies are given carbon credits, for which they are allowed to emit a certain amount of greenhouse gas. If companies struggle to stay within the limits, they have to buy more carbon credits. If they have credit left, they can sell those rights to other companies and/or get rewarded for doing well at reducing emissions.
Sometimes, companies can earn additional carbon credits by engaging in activities that reduce their carbon footprint or by investing in projects with a positive impact on the climate, like renewable energy.
Investors can gain exposure to the carbon credit stock market by investing in shares and/or ETFs (exchange traded funds) of those companies. As demand for sustainable business grows, companies with an active approach to investing in reducing their carbon footprint might gain an edge.
Best Carbon Credit Stocks to Watch
What are the best carbon credit stocks to watch? After having carbon credits explained, it is time to focus on the investing options for carbon credit stocks. The following companies have shown a strong commitment to reducing their carbon footprint and have significant involvement in the carbon credit market.
For interested traders, those might be the carbon companies to invest in if they are looking to gain exposure through carbon credit shares:
- Tesla - More Than Just Electric Vehicles
- Microsoft - Tech Company Commits Being Carbon Negative
- Shell – Significant Investments in Renewable Energy Projects
- Nike - Sports Retailer Focused on Carbon Neutrality
- Plug Power - Here Comes the Green Hydrogen Revolution
Tesla - More Than Just Electric Vehicles
Tesla is well-known for its electric vehicles, but CEO Elon Musk his commitment to sustainability exceeds just transportation. Under his leadership, the company is investing in multiple renewable energy projects, such as solar farms and battery storage systems. Both can be used for attaining carbon credits and reducing Tesla their own emissions while reaching sustainability goals.
Tesla shares have seen a lot of price action volatility throughout its history, reaching highs of over $414.00 dollar in November 2021. By January 2023, the stock had dropped to a low of $101.00. Tesla is a popular carbon credit stock that has seen exponential – but highly volatile - growth over the past few years, making it one of the most valuable companies in the world.
Microsoft - Tech Company Commits Being Carbon Negative
Big tech company Microsoft is investing heavily in global carbon offset programs. It aims to be carbon-negative by the end of 2030 and is also aiming to remove its historical emissions by 2050. To reach those goals, Microsoft is investing in projects to reduce carbon emissions, while at the same time buying carbon credits to offsets current emissions.
In 2021, Microsoft bought 1.3 billion carbon credits. In 2023, Microsoft is still leading the response to the climate crisis. The involvement of Microsoft in the carbon credit market makes it an interesting option for traders to decide which carbon credit companies to invest in.
The company's stock price has shown steady growth over the past several years, with occasional dips and spikes. Microsoft's annual gross profits have been rising and the company has a prime position in emerging industries like AI and cloud computing.
After reaching a record high of $349.67 in November 2021, Microsoft’s share price fell to $213.43 by November 2022. However, in the first quarter of 2023, the share price has risen to trade around $280.00.
Shell - Significant Investments in Renewable Energy Projects
Shell is a major player in the fossil fuel industry, recently resulting in harsher criticism by climate activists, politicians and financial action committees. While the call for switching to a more sustainable business model increases, the company is already making significant strides in reducing its carbon footprint and switching focus to renewable energy projects.
Stock price action for Shell has seen significant fluctuations over the past years. Shell’s share price is heavily influenced by oil prices, geopolitical events and other factors. Profits on fossil fuels exceeded expectations this year, but the company is losing money on sustainable energy.
Shell actively participates in the carbon credit market and invests in carbon offset as part of its commitment to become a net-zero emission company by 2050. As the company is shifting focus towards renewable energy and trying to reduce reliance on fossil fuels, it may appease its investors and sovereign wealth funds who are transitioning to companies that are more environmentally friendly.
Nike - Sports Retailer Sets Eyes on Carbon Neutrality
Global sports apparel and footwear retailer Nike has committed to reducing its carbon emissions and achieving carbon neutrality across its operations. To accomplish this, the company invests in renewable energy projects and is actively purchasing carbon credits to offset current and future emissions, making it an interesting option for traders looking for sustainable stocks and carbon credit shares for their portfolios.
As with all carbon credit stocks, performance is subject to a range of factors and goes with occasional dips and spikes. The company has strong branding, and it will likely be on its own initiative to incorporate more and more sustainable goals and carbon credit services. Attention towards climate change and the role of big companies is on the rise, and Nike has already been recognized for its leadership in sustainability by a number of organizations.
Nike’s stock price performance has historically performed well. It reached a record high of $179.10 in November 2021 before declining to $82.22 by October 2022. Since then, the share price has risen and was trading around $127.00 at the beginning of 2023.
Plug Power - Here Comes the Green Hydrogen Revolution
At Plug Power, they are determined to innovate. This is a company specialising in green hydrogen fuel solutions, with the potential to significantly reduce greenhouse gas emissions in various industries. The company uses their own hydrogen fuel cell technology to replace fuel based on fossil energy sources such as coal, oil and natural gas and thus provides the perfect service for carbon credit-wary businesses.
Hydrogen producer Plug Power shares have seen significant fluctuations over many years. In 2020, the stock was trading at a record high of $1,565.00. The share price collapsed in 2008 to $9.30. After a brief push high in 2020 towards $75, the stock is starting 2023 back around the $9.00 price level.
What are Carbon Credit ETFs?
An ETF (exchange-traded fund) is an investment fund that follows the performance of a certain selection of companies centred around a similar topic. Carbon credit ETFs are a basket consisting of companies somehow involved in generating, trading or managing carbon credits. By investing in carbon credit ETFs, the investors gain exposure to the broader market of carbon credits and can possibly profit from the general performance of multiple companies that have something to do with carbon credits.
The difference between carbon credit stocks and carbon credit ETFs is that when investing in carbon credit stocks of a company, the performance of the stocks is determined by just that company. Investing in carbon credit ETFs means you are achieving the result of the average performance of multiple companies and is considered to be a more diversified approach.
Best Carbon Credit ETFs to Watch
What are the best carbon credit ETFs to watch? Based on our research on the carbon credit shares market, here is a list of carbon credit ETFs that you can invest in via Admiral Markets.
Keep in mind that past performances give no guarantees for the future. The listed ETFs below will however provide diversified exposure to the growing carbon credit market. Here are the top carbon credit ETFs to watch:
Below is some additional background information on two of the carbon credit ETF UK investment options.
iShares MSCI Low Carbon Target ETF
The iShares MSCI Low Carbon Target ETF is an exchange-traded fund that provides investors with exposure to companies with low carbon footprints compared to the broader market. It provides a sustainable investment opportunity and balanced exposure to low-carbon companies and the carbon credit market.
Since its formation in 2014, the ETF rose to a record high of $176.59 in November 2021 before falling to $123.39 by October 2022. It started 2023 trading around $150.00.
KraneShares Global Carbon Strategy ETF
The KraneShares Global Carbon Strategy ETF is another exchange-traded fund investing in companies with lower carbon emissions and/or companies with carbon mitigation strategies. This carbon credit ETF is fairly new, having been launched in 2017. It reached a record high of $56.07 in February 2022 but declined to open 2023 around $35.00
Why Invest in Carbon Credit Shares and ETFs?
Investing in carbon credit shares offers an opportunity that comes with both advantages and risks. It gives investors a chance to simultaneously support companies that focus on sustainability and environmental initiatives, while at the same time potentially earning returns.
Carbon credit stocks can help to diversify a portfolio and hedge against the market and economic changes driven by climate change. As both companies, governments and individuals take action to reduce greenhouse gas emissions, demand for carbon credits and green companies is projected to further increase in the coming years.
However, the carbon credit stocks and ETFs market is still young and prone to volatility. New regulations for example could pose risks to investors and might result in fluctuations and potential losses. For those interested in exploring more about carbon credit investments, a good place to start is opening a demo trading account.
This provides a virtual environment to buy and sell carbon credit stocks and ETFs, allowing you to build your skills and knowledge of investing. You can familiarise yourself with how carbon credit investing works and gain insights into the way the carbon credit market behaves. As investing comes with inherent risks be sure to perform thorough research and exercise proper risk management.
FAQs on Best Carbon Credit Stocks & ETFs
Can you invest in carbon credits?
Yes, you can invest in carbon credits. Investors can do this by purchasing shares in companies involved in the generation, trading, or management of carbon credits, or by investing in ETFs that track the performance of such companies.
Is there a carbon credit ETF?
Yes, there are multiple carbon credit ETFs available to investors, such as the iShares MSCI Low Carbon Target ETF and the KraneShares Global Carbon Strategy ETF. These ETFs provide exposure to the broader carbon credit market by putting together a variety of companies that are somehow taking part in the carbon credit market.
What is a carbon credit?
Carbon credits are a kind of permit or certificate that allows the owner of the credit to emit a certain amount of greenhouse gasses into the atmosphere. They can be used as a mechanism to control and reduce greenhouse gas emissions.
INFORMATION ABOUT ANALYTICAL MATERIALS:
The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admiral Markets investment firms operating under the Admiral Markets trademark (hereinafter “Admiral Markets”). Before making any investment decisions please pay close attention to the following:
1. This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
2. Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
3. With view to protecting the interests of our clients and the objectivity of the Analysis, Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
4. The Analysis is prepared by an independent analyst (Jitanchandra Solanki, hereinafter “Author”) based on personal estimations.
5. Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis.
6. Any kind of past or modelled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
7. Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.
