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Invest in electric-vehicle batteries, water tech and crypto applications to ride the green wave, says UBS

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By Jack Denton

An “environmental credit crunch” will challenge current levels of unsustainable consumption, ratcheting up the pressure on companies to solve climate-related problems and providing opportunities for investors, said Swiss investment bank UBS.

“Urgent action is needed to combat the growing climate crisis,” the bank said in a report published on Tuesday, outlining how the economic costs of climate change are only adding to the environmental and human toll. 

But while investors face increasing uncertainty from climate risks in assessing asset values, there are strong, long-term investing opportunities in sustainable innovations, the bank said on Tuesday. 

Leveraging resources like oil and lumber has helped spur incredible economic growth in the modern era, including halving the number of people living in extreme poverty over the last 30 years, UBS /zigman2/quotes/206172872/composite UBS +2.40% said in the report, released ahead of Earth Day on April 22.

But it has come at the cost of depleting those resources. Amid a wider social shift toward sustainability, investors are increasingly looking to evaluate investments under a framework of environmental, social, and governance factors, called ESG.

Plus: Ahead of Biden’s climate summit, U.K. toughens its greenhouse gas emissions targets

“Companies that are on the right side of history, when it comes to climate change and reducing their own carbon footprint, will better be positioned to prevent climate risks, deal with tighter regulations, and avoid reputational concerns,” said Solita Marcelli, UBS Global Wealth Management’s chief investment officer for the Americas, in a call with the media.

“Companies that emerge as leaders in developing solutions to tackle environmental challenges could really offer attractive long term growth prospects,” Marcelli added. “We think sustainability will continue to grow as a core part of the decisions that investors make as they build out their portfolios.”

UBS grouped some of the most pressing issues related to climate changes into four themes, and suggested potential areas for investment in sectors that address these problems. Here’s how it breaks down:

People, health and communities

Air pollution is the greatest environmental-linked threat to humans, UBS said, and is the fourth leading cause of death around the world. Climate change has profound human implications, the bank said, including extreme heat in urban centers that is increasingly claiming lives.

The bank suggests investing in treatments for illnesses linked to climate change, which includes both drugs and medical devices. Urban planning solutions will also be critical, UBS said, including technologies for “smart cities” — data-driven communities that use technology to operate more efficiently. 

Energy

Emissions related to energy account for more than two-thirds of global greenhouse gas emissions, according to the bank. But a major problem facing the energy angle of addressing climate change is ensuring that humanity’s vast energy needs are met, UBS said. As we move toward new technologies and infrastructure, long-term sustainability needs to be considered, the bank said, and the role of government will be key.

Investors should look to companies with energy-efficiency solutions, as well as those focused on generating renewable energy like wind and solar, according to UBS. Alternative fuels in the form of hydrogen, biofuels, natural gas, and synthetic fuels are also likely to become more popular, the bank said.

More: This technology could transform renewable energy. BP and Chevron just invested

UBS also highlighted the emerging role of electric transport and the role that fuel cell and battery companies will play in facilitating the rise of cleaner vehicles. UBS is bullish on electric vehicles, and predicts that EVs will penetrate 100% of the automobile market by 2040, with Volkswagen /zigman2/quotes/206919008/delayed XE:VOW +2.88% joining Tesla /zigman2/quotes/203558040/composite TSLA -0.39% as the most dominant players in an industry that includes rivals NIO /zigman2/quotes/204905836/composite NIO -0.58% , XPeng /zigman2/quotes/219982686/composite XPEV -3.38% , and General Motors /zigman2/quotes/205226835/composite GM +4.05%

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$ 15.36
+0.36 +2.40%
Volume: 1.33M
May 5, 2021 4:00p
P/E Ratio
8.30
Dividend Yield
2.39%
Market Cap
$53.08 billion
Rev. per Employee
$450,560
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/zigman2/quotes/206919008/delayed
XE : Germany: Xetra
264.00
+7.40 +2.88%
Volume: 82,945
May 5, 2021 6:30p
P/E Ratio
15.88
Dividend Yield
1.82%
Market Cap
€119.12 billion
Rev. per Employee
€336,391
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/zigman2/quotes/203558040/composite
US : U.S.: Nasdaq
$ 670.94
-2.66 -0.39%
Volume: 21.90M
May 5, 2021 4:00p
P/E Ratio
671.54
Dividend Yield
N/A
Market Cap
$648.90 billion
Rev. per Employee
$445,694
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/zigman2/quotes/204905836/composite
US : U.S.: NYSE
$ 37.71
-0.22 -0.58%
Volume: 24.24M
May 5, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$59.52 billion
Rev. per Employee
N/A
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/zigman2/quotes/219982686/composite
US : U.S.: NYSE
$ 27.99
-0.98 -3.38%
Volume: 5.18M
May 5, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$23.25 billion
Rev. per Employee
$166,548
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/zigman2/quotes/205226835/composite
US : U.S.: NYSE
$ 57.58
+2.24 +4.05%
Volume: 26.81M
May 5, 2021 4:00p
P/E Ratio
13.32
Dividend Yield
0.00%
Market Cap
$79.74 billion
Rev. per Employee
$790,226
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