Credit Suisse names a top investment trend for next year — and picks the stocks to buy

Published Wed, Dec 15 20216:31 PM EST

Credit Suisse analysts say decarbonization is one of the themes set to "dominate the investor agenda" in 2022. Here are their top stock picks to play the trend. It comes after a tough year for ESG investing — which takes environmental, social, and governance factors into account — amid stretched valuations and a recovery in commodity prices. Global ESG assets continued to rise in this year and are likely to exceed $53 trillion by 2025, Credit Suisse said in a note on Dec. 6. Yet, "generating alpha is becoming more challenging," its analysts, led by Eugene Klerk, added. Despite this, Klerk and colleagues expect ESG investing to gain momentum in 2022 — with decarbonization named "the biggest topic for ESG and Impact investors." They highlighted that the investment requirements to decarbonize the world — especially in the light of COP26 climate deal — are "substantial." "Annual investment needs relating to a range of exposed end markets including renewable energy, energy efficiency and infrastructure are close to US$2.5trn, which is 150% above the current annual investment run rate of US$1trn," the analysts wrote. Stock picks They named a number of key stocks that they believe are "well positioned to benefit from the potential increase in spending on decarbonisation-related products and services." These include European stocks such as Siemens , Air Liquide , Enel , Kingspan and EDP . American stocks that made the list include Union Pacific , Deere & Co , Analog Devices and Air Products and Chemicals . Meanwhile, the bank's picks in Asia include Chinese battery behemoth Contemporary Amperex, electric vehicle manufacturer BYD , solar glass maker Xinyi Solar, CK Infrastructure and Singapore's Sembcorp Industries . Credit Suisse also listed a number of other "stock ideas for 2022," after screening for companies across various ESG-related themes that score well on metrics such as cash flow returns, consensus estimates and share price returns. Within the building and energy efficiency theme, the bank's picks include French electrical equipment group Schneider Electric , construction firm Sika , factory automation equipment maker Emerson Electric and U.S. industrial conglomerate Johnson Controls . Chinese consumer electronics firm Haier , industrial automation and inspection equipment manufacturer Keyence , power management solutions firm Eaton , and industrial solutions provider Inovance Technology also make the list. Meanwhile, the bank's diversity screen turned up chip maker ASML , Sony and Australian retail group Metcash . Analytics firm RELX , U.S. software company Autodesk and Chinese laser equipment manufacturer Han's Laser appeared on the bank's automation screen.

A delegate walks past a sign during the UN Climate Change Conference (COP26) in Glasgow, Scotland, Britain, November 11, 2021.

Yves Herman | Reuters

Credit Suisse analysts say decarbonization is one of the themes set to "dominate the investor agenda" in 2022. Here are their top stock picks to play the trend.