Hydrogen is the key to a low carbon economy, and these stocks will benefit, says UBS

A cyclist passes oil silos at the Royal Dutch Shell Pernis refinery in Rotterdam, Netherlands, on Tuesday, April 27, 2021.
Peter Boer | Bloomberg | Getty Images

Hydrogen will play a key role in the green energy transition, and UBS put together a portfolio of stocks across sectors that are poised to benefit.

The firm focused on so-called blue hydrogen, which is made with natural gas and incorporates carbon capture and storage. UBS said this is a necessary stepping stone toward green hydrogen, which is produced using renewable energy.

"Global discussions around the potential for a hydrogen (H2) economy have accelerated in the past 12-months...H2 has been well discussed as one of the major contributing forces in helping decarbonize the world's economy, in particular given that some industries cannot easily make the battery shift," the firm wrote in a recent note to clients.

The industrials, aviation and shipping industries are among those that are difficult to decarbonize given that they can't easily be powered by batteries due to factors including weight and cost.

UBS said that with supportive policies and declining costs hydrogen could make up 10% of global energy consumption by 2050, with the investment potential hitting more than $1 trillion.

Given the market's potential, the firm said companies across sectors will be affected. Oil and gas companies that have natural gas infrastructure could see the value of those assets expanded, while utility and electrical equipment manufacturers could see increased demand.

Here are some of the firm's top picks: