Updating our Green Transformation theme basket Updating our Green Transformation theme basket Updating our Green Transformation theme basket

Updating our Green Transformation theme basket

Equities 8 minutes to read
Peter Garnry

Head of Equity Strategy

Summary:  The green transformation theme was the best performing theme in equity markets last year and is year-to-date the best performing theme underscoring the continuing momentum and high demand for green stocks. We have updated our basket of 40 stocks providing inspiration on how to get exposure to this theme. The green transformation success is also becoming its own enemy with valuations on green stocks becoming extreme compared to the rest of the equity market. Are investors overpaying for the green future?

Last year on 9 January 2020 we wrote about green stocks and our prediction that the green transformation theme will become a mega trend in financial markets and our society over the next decade. As we write in our recent Q1 2021 Outlook, we never imagined the green transformation theme would see such a strong demand from investors making it the best performing theme last year. This year, and especially if we are right about our reflation theme and rising interest rates, we could see the green transformation theme come under pressure and see a divergence between green quality stocks and green speculative stocks.

A new a sharper Saxo Green Transformation basket

Our regular readers will know that we are in the process of rolling out many new equity themes, as globalized equity markets and new technological innovation have made the old classification systems across equity indices and sectors obsolete. We have already launched our Commodity Sector, Bubble Stocks, and NextGen Medicine baskets and are beginning to integrate them in our research notes, presentations, and our daily Saxo Market Call podcast. The table below shows the performance across the equity theme baskets we have launched, and the green transformation theme is the best performance basket year-to-date and is up 10.5%.

Themes are a better way to digest the equity market and the green transformation theme is an example of a market theme spanning many different industries and would have been difficult to capture looking at traditional classification techniques. We have written many notes on the green transformation last year and will continue this year, but as part of our exercise of rolling out these new theme baskets we have taken a new look at our Green Transformation basket and updated it to reflect our best bid on how to get exposure to this theme.

The table below shows 40 stocks with exposure to various categories under the green transformation theme spanning battery & energy storage, bioplastic, carbon capture technology, environmental services, fuel cells & hydrogen, hydro, solar, and wind. In all categories, we have preferred pure exposure in a category and then preferring large cap over small cap companies. Carbon capture technology is the only category with only pure play globally so far, so that category is unique. The bioplastic category is together with carbon capture the two categories with the least revenue and most emerging technology which increases the risk considerably.

NameTickerCategoryMarket capRevenueYTD (%)5yr (%)
Panasonic6752:xtksBattery & energy storage33,66568,90421.845.4
Ganfeng Lithium002460:xsecBattery & energy storage27,89176037.9985.5
AlbemarleALB:xnysBattery & energy storage18,4933,58917.8242.0
AlfenALFEN:xamsBattery & energy storage2,2891604.6NA
Good Natured ProductsGDNP:xtsxBioplastic11380.0580.0
Symphony Environmental TechnologiesSYM:xlonBioplastic471116.7233.3
Aker Carbon CaptureACC_ME:xoslCarbon capture1,308NA13.5NA
TeslaTSLA:xnasElectric vehicles802,53124,57820.02,084.7
NIONIO:xnysElectric vehicles97,4381,13327.1NA
XPengXPEV:xnysElectric vehicles44,54333631.7NA
ZaptecZAP-ME:xoslElectric vehicles4691821.7NA
Blink ChargingBLNK:xnasElectric vehicles1,90737.2799.9
Waste ManagementWM:xnysEnvironmental services48,75215,455-2.2135.7
Veolia EnvironmentVIE:xparEnvironmental services15,75030,43711.722.3
Tomra SystemsTOM:xoslEnvironmental services7,3521,063-0.6411.1
Cleanaway Waste ManagementCWY:xasxEnvironmental services3,7091,566-0.9251.2
Plug PowerPLUG:xnasFuel cells & hydrogen31,29823097.23,390.9
Ballard Power SystemsBLDP:xtseFuel cells & hydrogen10,36810658.42,456.4
Bloom EnergyBE:xnysFuel cells & hydrogen6,67878540.2NA
NELNEL:xoslFuel cells & hydrogen5,5455915.1847.4
ITM PowerITM:xlonFuel cells & hydrogen5,150432.23,538.4
Ceres PowerCWR:xlonFuel cells & hydrogen3,5462413.82,141.9
China Yangtze Power600900:xsscHydro66,3747,221-1.3100.1
Brookfield Renewable PartnersBEP:xnysHydro19,9802,98014.4328.0
Meridian EnergyMEZ:xasxHydro14,9642,1688.9337.9
Enphase EnergyENPH:xnasSolar26,79162420.97,872.8
Xinyi Solar Holdings00968:xhkgSolar21,4561,161-5.9778.9
SolarEdge TechnologiesSEDG:xnasSolar16,4451,4260.6995.6
First SolarFSLR:xnasSolar11,3043,0637.853.1
Scatec SolarSSO:xoslSolar6,9112038.1851.4
Vestas Wind SystemsVWS:xcseWind48,37513,5981.6228.7
Siemens Gamesa Renewable EnergySGRE:xmceWind29,64910,6238.0139.0
China Longyuan Power00916:xhkgWind13,2083,98862.2180.7
Northland PowerNPI:xtseWind7,9061,2508.9201.5

Source: Bloomberg and Saxo Group
* Market capitalization, 12-month rolling revenue and 12-month rolling net income are all measured in USD mn.
** YTD (%) and 5yr (%) is total return year-to-date and the last five years in local currency

Performance and risk in the green transformation theme

Our Green Transformation basket obviously suffers from survivorship and selecting biases, so the past performance measure is no indication of future performance. But the basket return gives an insight into the demand for green stocks in 2020 which was a landmark year for green investing driven by strong political signals and reforms such as green bonds in Europe and China’s commitment to become carbon neutral before 2060. Last year was also the year when electric vehicles had their breakthrough in Europe with around 10% of all new cars sold being hybrids or EVs. Our Green Transformation basket is up 1,155% over the past five years compared to 94% for the MSCI World.


While the green transformation theme has been successful for investors the past couple of years the risks have gone up. Not because the trend is not right, or the political capital is vanishing because climate change has not gone away. But risks have gone up because of high equity valuations with the basket P/E ratio now at 266 and price-to-cash-flow at 34 which are steep valuation premiums compared to the global equity market. The question is naturally whether investors are now paying too much for the green future.


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