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The top 4 ASX clean energy stocks for ESG investors

ASX-listed renewable energy stocks stand to benefit from rising concern over climate change amongst investors and ambitious growth targets from federal government.

Source: Bloomberg

A rising sense of environmental awareness has led to the emergence of environmental, social and governance (ESG) investment, to cater to the needs of those investors who prioritise ethical issues such as sustainability and societal impacts.

In Australia, demand for ESG investment has resulted in the creation of exchange-traded funds (ETFs) such as Australian Ethical as well as the provision of ESG products by established players such as Martin Currie and Vanguard.

Major fund managers such as AustralianSuper have issued statements in support of ESG investing, committing to the allocation of funds to ethical and sustainable companies.

This enthusiasm at the institutional level for ESG investment could aid the fortunes of those listed companies that promise to make a real difference to the efficiency levels and sustainability chops of the real economy.

In Australia, renewable energy companies perhaps figure most prominently amongst top ESG investment picks, due to the strength of the country's R&D capabilities in the sector as well as its abundance of geographical features that support the development of solar and wind power facilities.

Figures from Australia's Department of Climate Change, Energy, the Environment and Water indicate that renewable energy sources accounted for 8% of Australian energy consumption in 2020 - 2021.

In 2021, renewable energy sources accounted for 29% of Australia's total electricity generation, with solar accounting for 12%, wind 10% and hydro 6%.

In 2022, the Australian federal government committed to renewable energy accounting for 82% for power generation by 2030. This marks an increase of over 50 percentage points compared to 2021, which means Australia's renewable energy sector will need to dramatically increase output in order satisfy the national target.

In its second budget, the Albanese government committed to the development of green technologies as part of its 'plan for Australia to become a renewable energy superpower.'

It could now be an opportune time for Australian investors to consider ASX-listed renewable energy stocks, given support for clean power at the institutional and governmental levels, as well as within the general electorate.

Here is a list of four of the top renewable energy stocks listed on the ASX as of November 2023 for the consideration of investors who have made climate concerns a priority or expect the sector to flourish due to the broader push for clean power.

1. Meridian Energy Ltd (ASX: MEZ)

2. Genex Power (ASX: GNX)

3. Infratil (ASX :IFT)

4. Origin Energy Ltd (ASX: ORG)

1. Meridian Energy Ltd (ASX: MEZ)

Meridian is the largest power generator in New Zealand and a stand out amongst the world's national utilities companies in deriving 100% of its power from renewable sources.

MEZ's portfolio of renewable energy properties includes seven hydropower stations, five wind farms, as well as a diffuse array of commercial solar installations erected on the roofs of commercial sites.

Its 122 MW Manapouri hydro station is the largest hydropower facility in New Zealand. The station is situated in an underground installation in the UNESCO World Heritage site of Fiordland National Park, located on the country's South Island.

2. Genex Power (ASX: GNX)

Electricity generation company Genex Power focuses on the development of renewable energy and storage facilities. It currently has 100 MW in operation and a further 300 MW under construction.

Its flagship project is the Kidston Clean Energy Hub in north Queensland, which consists of the 50 MW Kidston Solar Project that commenced operation in 2017, alongside the 250 MW Kidston Pumped Storage Hydro project.

The Kidston Pumped Storage Hydro Project is the first such project to be developed by the private sector and the third largest electricity storage device in Australia.

Genex recently achieved a milestone on the project, with the cmpletion of the main access tunnel for underground works.

'This milestone is extremely significant, as it enables Genex and its stakeholders to draw a line under one of the material outstanding risk items for the underground works,' said Genex CEO, Craig Francis.

' Importantly it moves us one step closer toward commencing the power station fit-out works ahead of energisation later in 2024.'

3. Infratil (ASX :IFT)

New Zealand-based infrastructure investment company IFT has operations around the globe, in New Zealand, Australia and Asia as well as the US and EU.

IFT is highly committed to ESG investment, with renewable energy being one of its four core investment areas alongside airports, healthcare and digital infrastructure.

The company has a 51% stake in New Zealand hydro-power company Manawa Energy. Manawa owns 26 hydro-power schemes with a total installed capacity of 498MW, accounting for 9% of New Zealand's total hydro capacity.

IFT also has a 37.1% stake in Boston-headquartered renewable energy developer Longroad Energy, and a 40% in pan-European wind and solar power company Galileo.

4. Origin Energy Ltd (ASX: ORG)

While Origin is renowned as the operator of Australia's largest coal-fired power plant at Lake Macquarie in New South Wales, the company appears to have seen the writing on the wall when it comes to fossil fuels and the need to transition to clean energy facilities.

ORG is a leading player in Australia's solar power sector and one of the country's leading installers of home solar panels.

It has purchase agreements with a slew of solar and wind power farms across Australia, including the 110 MW Darling Downs Solar Farm and the Stockyard Hill Wind Farm in Victoria.

The energy company expects to source 25% of its energy capacity from renewables once its current waitlist of green energy assets under development comes online.

ORG is also currently the obejct of a $10.5 billion bid made by a consortium led by Canadian clean energy firm Brookfield. Proxy advisor CGI Glass Lewis has backed the bid, stating that it was an 'attractive' transaciton that would allow investors to cash out at a premium.

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This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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