Buy these green tech stocks essential to the energy transition, says UBS

Published Sun, Feb 28 20219:00 AM EST

Opportunities are emerging for investors to capitalize on the world's shift to renewable energy, including plays in green technology. In a recent report, UBS outlined companies in green tech — or those utilizing technological advances for positive environmental impacts — that represent growth opportunities. "While carbon neutrality goals are long term, we see attractive investment opportunities emerging in the short to medium term," the firm said. "We expect these companies to outperform global equities due to superior growth potential driven by green investments." UBS said a new wave of private investments fueled by green stimulus programs will drive green tech adoption. One area the firm highlighted is the ongoing digitalization of buildings, which should benefit companies including Honeywell . More than 35% of the nation's carbon footprint comes from buildings, according to data from the U.S. Environmental Protection Agency. On average, 30% of the energy used in commercial buildings is wasted, meaning more efficient spaces are key to cutting emissions. Industrial conglomerate Honeywell, which makes building management systems, is on UBS' "most preferred" list. "We see it favorably exposed to the major growth themes of automation, environmental, and energy solutions," the firm said. UBS also noted that the company's balance sheet is less levered compared to peers, meaning the company has more flexibility to return money to shareholders or make acquisitions. Shares have gained 26% in the last year. Another stock that makes UBS' "most preferred" list is utility name NextEra Energy . The company has sizable wind and solar operations, and in the fall briefly saw its market cap top that of Exxon's. "NextEra benefits from competitive advantages in utility-scale wind and solar project development, growth in its Florida utility franchise, and a strong management team," UBS said. "These qualities combine to make NextEra one of the best-positioned utilities in the US." The firm anticipates NextEra growing its dividend by 10% annually. NextEra's shares have advanced nearly 15% in the last 12 months. The coronavirus pandemic brought global activity to a standstill and sent the S & P 500 tumbling 30% at the fastest rate on record . UBS said that climate change could spur similar economic shocks and supply-chain disruptions. "The meaningful pursuit of carbon reduction at a global level will need to focus on power generation, transport, industry and heating/cooling areas, with the adoption of vital green technologies to achieve net zero targets," the firm said. Electric vehicle supplier Aptiv is another company that UBS said will benefit from the energy transition as EVs become more widespread. The firm believes Aptiv will be able to nearly double its revenue over four years. Shares are up about 92% over the last year. Johnson Controls and Trane Technologies are among the other names UBS highlighted. - CNBC's Michael Bloom contributed reporting.

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Opportunities are emerging for investors to capitalize on the world's shift to renewable energy, including plays in green technology.

In a recent report, UBS outlined companies in green tech — or those utilizing technological advances for positive environmental impacts — that represent growth opportunities.