For environment-minded investors who want to invest in small companies with high-growth potential, there is a general category of stock that will hold appeal: small-cap impact investment stocks.
This breed of company is a natural response to trends in business, culture, and capital markets. Green energy is increasingly recognized as inexpensive and carrying fewer externalities than fossil fuel companies. A wave of popular sentiment in favor of green stocks will crest as climate change worsens and Gen Z investors enter the market. The object of remaking our energy landscape is a huge opportunity, creating ample white space for small-cap companies (defined here as less than a $1.5 billion market cap) that are — directly or indirectly — advancing environmental justice.
One such company is Bee Vectoring Technologies (BEVVF), a Canadian firm that provides a bee-derived agriculture solution called an inoculant, which replaces harmful chemicals used for managing crop health with a type of bacteria that gets added to soil. The science is surprisingly straightforward: Bees collect a naturally occurring fungus powder while moving through their hives, then drop spots of that powder on plants they visit which absorb the fungus, helping to protect them against disease. The company has earned U.S. EPA approval and the early data is promising: Commercial deployments in multiple U.S. states repeatedly demonstrated greater yields.
“The system uses the natural pollination process of bees, uses no fossil fuels, and no water and [it’s] a better alternative to the application of chemical pesticides using heavy machinery,” says BVT CEO Ashish Malik, adding that a number of other companies are getting into the space. “There are several exciting companies developing technologies and solutions for sustainable agriculture — the more interesting ones are focused on solutions that make agriculture more productive while also reducing the impact on the environment and the planet’s resources.”
PureCycle (PCT) is not a competitor of BVT, but it’s another small-cap, renewable energy stock to watch. The company converts plastic waste into a renewable resource: an ultra-pure recycled polypropylene (the plastic’s original form). PureCycle already boasts a handful of marquee clients, including Nestlé and Procter & Gamble. With a market capitalization of around $1.48 billion, PureCycle is on the larger side of small-cap stocks, but with plenty of upside remaining.
No conversation of renewable stocks is complete without mentioning solar. In 2020, the U.S. solar industry grew 43% faster than in 2019, while solar installations in the U.S. are expected to quadruple by 2030, according to a recent report. But the solar industry is already mature, with some leading firms such as Vestas Wind Systems (VWDRY) boasting $250 billion market caps.
Solar investors hoping for outsized returns will need to look downfield, and one place to start is ReneSola (SOL). With a market cap of just $297 million, the solar stock has plenty of room to grow. ReneSola focuses on development, construction management and financing for solar projects around the world. It serves clients across the U.S. and Europe, including New York, Minnesota, Poland and Hungary.
The good news for investors? These three small-cap green stocks are just the tip of the iceberg. A world of sustainable upside awaits.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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