From EVs to hydrogen: BofA names the global stocks to trade an emerging $2 trillion market

Published Mon, Aug 2 202110:30 PM EDT

Lucy Handley @in/lucy-handley-b2b0a61a/@lucyhandley

Analysts from Bank of America have picked multiple European stocks to trade the trend of climate change mitigation that it says will soon be worth more than $2 trillion. Its picks range from firms involved in electric vehicle infrastructure to those in hydrogen production. BofA said capital goods firms are "critical enablers" in a market it estimated would be worth $2.3 trillion by 2025, in light of EU proposals to reduce greenhouse gas emissions by 55% by 2030 . Such companies are "at the heart of the energy transition," manufacturing products involved in electric vehicle charging, energy efficiency for buildings and hydrogen production, BofA's analysts led by Alexander Virgo said in a July 22 research note. "Three of the top 5 markets by size appear to be direct customer markets of capital goods companies – HVAC [heating, ventilation and air conditioning], Smart Grid and Wind, while the fastest growing markets include Smart Homes," the analysts added. "There are a couple of explicit targets in the EU plan to which capital good companies are directly exposed, notably the commitment that 3% of public sector buildings should be refurbished every year to drive the overall shift to more efficient buildings, the commitment to EV charging capability every 60km of road and the explicit commitments to hydrogen production capacity over the coming 15-20yrs," BofA said. So-called green hydrogen is made by splitting water into hydrogen and oxygen using electricity from renewable sources. BofA's buy-rated stock picks include: Building sector A reduction in energy use, demand for more efficient lighting systems and an uptick in the need for remote monitoring are all set to benefit stocks including heavy equipment maker ABB , industrial firm Siemens and electricity company Rexel . Lighting company Signify is also set to benefit, BofA said, as a producer of internet-connected lighting systems. Renewable power and hydrogen Firms involved in wind energy, the hydrogen supply chain and energy storage are set to benefit from the EU's proposals, such as cable company Nexans , wind turbine manufacturer Vestas and renewables firm Siemens Energy , for its role in hydrogen production. Electric vehicles Companies involved in EV charging, battery construction and rail are likely to benefit from the EU's plan, the analysts said. Its picks include Atlas Copco for its role in electric battery construction, braking systems company Knorr-Bremse , and Sandvik , chosen for its electric-powered underground mining trucks. BofA also included ABB and Siemens for their role in EV charging infrastructure. CNBC's Holly Ellyatt contributed to this report.

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