The investment case for decarbonization will remain key into 2022, according to Morgan Stanley . Here are the bank's favorite stocks to play the trend, including three that it says have a potential upside of over 50%. "From a top-down perspective, we do not expect a dominant catalyst to emerge next year, after a peak year for climate policy in 2021. However, execution on growth opportunities could still drive certain stocks," Morgan Stanley's strategists, led by Jessica Alsford, said on Dec. 14. They advised investors to "focus on individual stock stories." In their list of "sustainability stocks for 2022," the strategists named a number of stocks related to decarbonization, which the bank described as a "structural global trend." Decarbonization beneficiaries The strategists like hydrogen fuel-cell maker Plug Power , which they describe as a "clean tech innovator" with a strong position in the sector. The company is set to enjoy rapid revenue growth and has a strong balance sheet with which to fund its global expansion, the bank said. The company could also benefit from proposed legislative support for green hydrogen, the bank added, as it ascribed a price target of $65 on the stock, which closed at $29.80 on Dec. 20. — an implied upside of 118%. Swiss cement maker Holcim is another of Morgan Stanley's picks. The bank said the company is leveraging the decarbonization trend by rolling out "green" cements and concretes. The company's "low carbon concrete," branded ECOPact, "will allow Holcim to take share and enjoy above market pricing power," the bank said. Morgan Stanley has a price target of 74 Swiss franc ($80.40) on the stock, which closed at 44.2 Swiss franc on Dec. 20. This represents a potential upside of 67%. Nasdaq-listed ReNew Energy — India's second-largest pure play renewable company — makes the list too. Morgan Stanley expects the company to benefit from strong renewables growth in India, led by both the public and private sectors. The company's strong balance sheet, broad range of services and experience with diverse contracts are competitive advantages, according to the bank. Morgan Stanley has put a price target of $11.96 on the stock, implying a potential upside of 53% to its closing price of $7.80 on Dec. 20. The bank also likes Scottish energy company SSE and Norwegian aluminum and renewable energy company Norsk Hydro . All five of the bank's decarbonization beneficiaries are overweight-rated by its analysts.
Electronic signage at the headquarters of Morgan Stanley in New York.
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The investment case for decarbonization will remain key into 2022, according to Morgan Stanley. Here are the bank's favorite stocks to play the trend, including three that it says have a potential upside of over 50%.