With the massive uptake in people looking for ‘ethical’ investments in recent years, more and more money continues search for companies on the ASX and abroad which can have a positive impact on the environment.
Oftentimes, when people say ‘ethical’ investing, what they really mean is ‘environmentally-friendly or ‘eco-friendly’ investing, which is a whole other matter entirely.
Many of the ‘ethical’ ETFs and funds out there base their ESG qualifications on governmental & social issues such as workplace equality, and aren’t really about producing outcomes that are physically good for the Earth’s environment as a whole.
Even ethically-oriented super funds such as Australian Ethical (ASX:AEF) which have boomed only have a smaller sub-section of their investment profile going towards eco-specific concerns.
Renewable energy, sustainable production processes, low-emission agriculture and other similar enviro-specific companies are otherwise largely ignored from major ‘ethical’ ETFs as well.
So, for those who are wanting to put their dollars behind innovative Aussie companies creating tech or similar services aimed to benefit the environment, what does the ASX have to offer?
To be honest: slim pickings, mostly.
The majority of the most fundamentally-sound eco companies that actually generate funds are mostly dual-listed New Zealand companies on the ASX.
The rest are mostly a grab-bag of R&D and proof-of-concept projects with intriguing-sounding tech of which most have not yet proven to be commercially viable. That said…
We take a look at 10 of the most interesting environmental / eco companies on the ASX here.
NOTE: we have indicated where we hold any of these companies.
1. Meridian Energy Ltd (MEZ)
What they do: renewable energy provider, largely hydro-electric
It’s a testament to how lacking Australia’s renewable energy space continues to be when the bulk of the best profit-generating renewables companies on the ASX continue to be those Kiwi companies that are dual-listed.
While our country has the potential to be a world leader in this space, it’s our brothers across the ditch that continue to set the example for how it’s done.
So is the case for Meridian Energy, a dial-listed New Zealand renewable energy company with its heaquarters in Wellington.
Unlike most of the other up-and-comer companies on this list, this is a pretty big and established company – all told, this is one of the largest organisations in NZ, with a majority ownership stake held by the New Zealand government.
The company provides retail eletricity services to an array of clients across the residential, industrial and commercial spaces with the bulk of their revenue coming from NZ itself, but also here in Australia and the UK.
They retail under the Powershop brand here in Aus, and also provide energy services which are on-sold by online retailer Kogan.
While the majority of its revenue comes from its network of retail connections (around 345,000 in NZ and 185,000 in Australia), a large chunk of the company’s commited energy output is absorbed by the New Zealand Aluminium Smelter (NZAS) – the only of its kind in New Zealand.
This smelter is scheduled to close operations in 2024, opening up the opportunity for the reallocation of a large portion of available energy that can either be exported, or potentially preserved via the consutruction of a new battery.
Despite a challenging year in 2021 due to a variety of climate events adversely affecting its hydro production & output, the company still managed to generate record revenues and profits, and looks well-positioned to do so going forward should they find an adequate spot to re-allocate all that extra eco-friendly power.
2. Environmental Group Ltd (EGL)
What they do: water & air treatment and recycling services
With its headquarters in Melbourne, Environmental Group Ltd serves as an umbrella company of sorts, with five separate business units – all concerned with addressing different aspects of environmental waste and quality issues – contained within.
These each contribute to positive tailwinds for the company given the current ESG trend of reducing carbon emissions, with a solid pipeline of work already coming up for the financial year.
Their Water Services employ an extraction technique to reduce levels of manufactured chemicals present in water systems – which can otherwise lead to various forms of cancers in the long-term. Recent trial results of their tech performed very well, with the goal to develop their first commercial plant in 2022.
The company’s Energy Services sell & maintain boilers, burners and other steam equipment to clients such as hospitals & food manufacturers, providing an ongoing revenue stream.
Their Air Pollution systems provide (and maintain) pollution-control equipment which scrub & filter gas emissions from plants and other emitting businesses. They were recently rewarded with the contract for designing emissions systems for a lithium refinery; should this prove successful it provides them with a solid case study for approaching more clients in the up-and-coming lithium boom space moving forward
EGL’s Gas Services provide enhancements to turbines to lower emissions, with the same sales + maintenance combo of revenue streams.
Lastly, their Waste Services division sell and service a number of industry-leading recycling solutions, with plenty of opportunities for tenders (the government kind, not the chicken kind).
Company revenue figures have been trending upward each of the last three years, and the company has proven its business model can be profitable while still funding trials and R&D. They’re expecting an earnings increase of 15% year on year moving forward while also aiming to improve margins.
As a single company that provides diverse multi-aspect environmental exposure all-in-one – and has shown they can make actual money already – they rank as a safer bet than some of the more pie-in-the-sky companies elsewhere on this list.
3. Delorean Corporation (DEL)
What they do: conversion of waste product to renewable gas
One of the newest-comers to the ASX in the renewables space, Western Australian company Delorean Corporation sit at the intersection of renewable energy and waste management, making for an intriguing and unique investment opportunity on our exchange.
The company IPO’d in April 2021, with its major selling point of producing biogas – a type of renewable that is used overseas but not yet prominent here in Australia. Delorean employ a process called anaerobic digestion, which diverts waste from landfill to be converted into renewable energy.
They are divided into three divisions: engineering, infrastructure, and energy retailing, encompassing the building of the bioenergy facilities themselves, the operation of these plants, and the ability to on-sell the energy generated to the consumer.
This mix gives them multiple potential revenue streams, as they can earn money from constructing facilities for third parties, charge fees for the acceptance of organic waste, or simply sell the energy to third parties or straight to retail.
They’re still very much in the funding, development and growth stage of the business, but have multiple build projects in the pipeline throughout Australia and New Zealand, several tender applications under review, and have signed several Memorandum of Understanding with a range of prominent Aussie organisations.
They’ve also been able to take advantage of millions of dollars worth of grants from government, and are exploring a potential pathway into the generation of renewable hydrogen.
How long it takes them to generate significant revenue remains to be seen, and its share price tumbled immediately after its IPO… but its one-of-a-kind nature on the ASX helps them stand out from the pack as one to keep an eye on.
4. GENEX Power Ltd (GNX)
What they do: renewable energy generation & storage
Featuring a mixed portfolio of over $1 billion worth of renewable energy projects and storage across Australia, GNX is one of the few pure-play renewables companies with physical assets that are actually based in Australia.
The company is in the process of constructing and ramping up its renewables base with a couple of notable flagship projects under construction.
Their chief attention-drawer is their under-construction major hub for renewable energy in north QLD that will feature an integrated mix of pumped hydro and solar. It’s still a fair way off completion, however, with the company aiming to have it completed by the end of 2024.
In the meantime, they’ve recently energised their 50-megawatt Jemalong Solar Project in central NSW, which is now generating renewable energy into the grid.
Once their QLD solar offering is complete, their two solar projects combined will generate enough power for about 41,500 homes; which isn’t massive, but still a solid first step to establishing legitimacy as a player on the Aussie renewables scene.
Genex are also developing a standalone battery storage system at Bouldercombe near Rockhampton in QLD (creatively named the Bouldercombe Battery Project) which will have a 50 megawatt capacity.
All told, they’ve got 400 megawatts of renewable energy and storage projects in the pipeline, and are already and continue to look for connection and offtake agreements to sign with interested 3rd parties.
This is likely one for the patient investor as the completion of their flagship projects are several years away.
However their revenue figures from their current solar generation will be interesting to see when they start filtering through & may at the very least flag them as a potential takeover target – should they show consistent growth.
5. Clearvue Technologies Ltd (CPV)
What they do: solar energy-generating glazing products/panels
As far as intriguingly innovative products go that to this point have yet to properly be commercialised, CPV would rank near the top of our list.
The tech they have created – a “smart building technology” that use a photovoltaic solution to generate renewable energy – seems like it could be a life-changer if rolled out on a mass-scale, yet so far there have been few takers willing to actually commit money to the product.
The ability to generate power from windows, which are made of low-to-zero-carbon material, has numerous theoretical applications, from office towers, to greenhouses, and in general reducing the carbon footprint of buildings as a whole.
With hundreds of patents in place, a range of partners participating in product trials, and plenty of potential use cases, you’d think this would be a company and product worth of catching more headlines.
Yet, outside of a brief hype period in April 2021 that caused a spike in the share price, it’s been gradually drifting in a down trend ever since.
The company/board recently admitted they needed to do a better job of investor relations to try and drum up greater amounts of sophisticated & institutional investor interest, and hired a dedicated IR staffer in response.
This feels like a stock that is waiting to pop on the slightest hint of a buy order being placed, and its share price is well down from past all-time highs since which nothing truly negative has cropped up news-wise.
However should none continue to materialise in the near to mid term, its future as a company may start to appear a little more tenuous.
6. Hazer Group Limited (HZR)
What they do: low-carbon hydrogen production
While several other energy generation companies on this list are simply attempting to replicate or expand on existing categories of renewables, Hazer Group are attempting to create a new kind all of their own.
The company is focused on the proof-of-concept and eventual commercialisation of their “Hazer Process” for the conversion of feed stocks (such as sewage treatment & its methane contents) into low-carbon-emission hydrogen & graphite.
It’s a “green” way to produce hydrogen without needing to involve initial energy sources such as wind or solar like many existing methods. This hydrogen can then, theoretically, be transported for use elsewhere (unlike other renewable generation sources), or put to use in vehicles – possibly cars, or probably more realistically, ships.
Its implications for heavy industry and decarbonisation of the sector are fairly tantalising, but it’s all dependent on the success of their initial pilot plant. Will it succeed?
The answer will stem from the completion of their Commercial Demonstration Project plant, which when done will have a yearly capacity for 100 tons of hydrogen and operate its own hydrogen fuel cell; one of the first of its kind in Australia.
The facility, located at Woodman Point in Western Australia, is aimed to be completed in the first half of 2022, however after some delays to fabrication were announced in December 2021 this remains to be seen and has dulled a bit of confidence in the company’s management (and its share price by association).
Hazer recently raised extra funding via a share purchase plan & institutional funding round in September / October of 2021 to strengthen the balance sheet with an extra $14 million, and with green hydrogen on the Aussie government’s decarbonisation roadmap, it seems to have decent support from both the private and public sectors.
It’s been a multi-year journey to get to this point, and with project completion getting closer, whether it will succeed enough to be viable – only time will tell.
7. Global Energy Ventures Ltd (GEV)
What they do: develop “green” shipping solutions for transporting hydrogen
Another ASX hydrogen-centric play albeit of an entirely different kind, GEV. If you’re a believer in green hydrogen as a viable and up-and-coming fuel source, then that hydrogen also needs to be transportable in some form, and that’s where this company comes in.
This is another fairly long-term play for ASX investors – they’re aiming to have first operations up and running by the mid-2020’s – so don’t expect any massive short-term share price movement or massive gains in the near future.
However, with a potentially huge addressable market, should hydrogen prove itself it’s easy to see why many are bullish on at least the concept of the tech, if not its viability. However there’s still a lot of “ifs” that will factor in to how things play out.
GEV’s main aim is to be able to commercialise the transportation of hydrogen to be used as a fuel source, including the development of a proprietary “Compressed Hydrogen Ship” capable of shifting 2,000 tons of hydrogen across the seas.
It would then theoretically allow the hydrogen to be transported “as is”, as opposed to using more energy for it being converted to a liquid state – with the end goal of cutting down on emissions throughout the entire supply chain.
The ship would be powered by electric fuel cells as well, reducing the environmental footprint even further, and then the hydrogen decompressed on the other end once it arrives at its destination.
This compression-based technique is currently only used on-shore, and there aren’t any other major international players who have proven the tech at scale for ships yet, either.
Japanese company Kawasaki are currently the furthest along this path, and the Japanese (including the likes of Toyota) appear to be bullish on hydrogen as a clean energy source in general for what it’s worth.
The company raised an additional ~$11 million via placements & share purchase plans at $0.125 per share in November 2021 to provide them with some more cash leeway moving forward.
With multiple Aussie and international companies attempting to push hydrogen as a way forward, someone is going to need to help take care of the supply chain. Will that be GEV?
Check back in a couple more years and see… or buy in now and be veeery patient.
8. NEW Energy Solar Ltd (NEW)
What they do: owner & seller of solar facilities and assets
Since its IPO on the ASX back at the end of 2017, solar energy investment company NEW has been something of a disappointment.
New Energy Solar was established with the goal of acquiring a range of solar and generally carbon-neutral assets, which would seem to have been an admirable and forward-looking purpose. However…
The lukewarm appetite for solar and renewables in Australia in general over the past few years did not work in its favour, leading to the company exiting its Australian position in recent years – kind of anticlimactic for an Aussie company.
Its share price has been in continual decline despite the acquisition of a pretty impressive portfolio of solar plants across the US in particular, with Aussie asset sell-offs, declining asset values, and underwhelming US electricity prices marring its history and overall business model to date.
Losses piled up, with after-tax losses blowing out into the tens of millions as the value of their assets declined, with some of their solar arrays damaged during the US fires not helping matters.
It’s currently trading at a share price well under the net value of its assets, and still manages to pay a fairly substantial dividend despite all this.
The company (and its shareholders) are betting on a turnaround in fortunes since the inauguration of the Biden government in the US and the general global pivot to renewables in general, which may make the present a fairly solid time for investors to buy in.
Solar has always seemed like an obvious pivot for global energy, however its widespread integration has been choppy at best up to this point.
9. Wide Open Agriculture Ltd (WOA)
What they do: oat milk, regenerative food & agriculture
One of the rare environmentally-focused agriculture stocks on the ASX, WOA is a Western Australian company that puts a focus on ‘regenerative’ farming techniques that aim to actually improve the health of their land, and be more sustainable overall as a result.
While they’re not ‘anti-meat’ – they still produce meat products such as beef, poultry and lamb, just farmed in a more sustainable fashion – they do have appeal for those who are after an investment in plant-based solutions.
This comes in two main forms.
The first is their oat milk range, marketed under the Dirty Clean Food consumer brand. With the oat milk market far eclipsing both the soy and almond milk markets in terms of growth, WOA have been able to expand their distribution to both the east coast of Australia as well as the south-east Asian market in recent years.
They also signed a distribution agreement with Woolworths supermarkets in November 2021 to start carrying their Oat Up line of milk, with the rollout commencing from March 2022 onward. As a result, any revenue figures this will contribute to the bottom line will have not been accounted for at time of wrting.
Their second key product – and one which tends to catch the eyes of most Aussie investors – is their attempted development of a lupin protein-based solution for the production of ‘fake meat’. Lupins (a type of legume) being the base for meat products is special vs. the typical soy solution due to lupins being cheaper, more readily available, and more sustainable to produce.
WOA are aiming to shift the lupin product from R&D to commercialisation in the near future.
The company also conducted a capital raise of around $20 million in late 2021 in order to built a plant-based milk manufacturing facility in Western Australia with the aim of creating the world’s lowest-carbon line of plant-based drinks.
Having posted nine consecutive quarters of revenue growth, the future is looking promising for WOA despite not yet being close to profitability, and it remains an admirable company nonetheless.
10. Envirosuite Ltd (EVS)
What they do: environmental monitoring software provider
Our status: held
A Sydney-based software and hardware provider, Envirosuite develop and on-sell a digital solution for monitoring various sub-catergories of pollution.
The software they offer allows for businesses in a range of industries – particularly airports, miners, the industrial sector and government districts – to assess levels of air, noise, smell, water and dust pollution.
Given the increasing pressure on almost all businesses to meet (or at least, claim to meet) specific environmental targets, EVS are positioned well for expansion; the software also provides carbon emission monitoring as well.
Things shifted for the company in particular after they switched their business model over to a SaaS (Software as a Service) subscription-type model a couple of years back.
As a result, the focus of the business has shifted to growing Annual Recurring Revenue (ARR) figures while still growing their business and edging ever-closer to profitability.
They’re still not profitable overall, but 2021 saw a large jump in revenue figures which led to their final quarter being roughly break-even in terms of profits. If they can replicate this over the course of a full year, and with momentum in their favour, then it will mark a turning point for the business and the way it is perceived.
The latest key focus has been on the company’s burgeoning EVS Water solution, with a $10+ million capital raise conducted in December 2021 for the specific purpose of growing this part of the business – as it has some of the highest profit margins.
