Goldman Sachs predicts surge in green capex and identifies potential winners

Goldman Sachs predicts surge in green capex and identifies potential winners

Goldman Sachs has predicted that “green capex” will be the leading driver of global infrastructure over the next ten years. Green capex refers to capital expenditures that are directed towards sustainability goals such as decarbonization, infrastructure, and clean water. The investment bank says that public and private sectors will see a boom in investment towards these goals, resulting in a surge in green capex. The firm estimates that there will be $6 trillion of annual green capex through this decade, with an incremental average of $2.8 trillion per year to support net zero, infrastructure, and clean water goals.

How to Play the Trend

Goldman Sachs shared its ideas on how to play the trend and suggested that an all-in approach across sectors is required to provide opportunities across the green capex supply chain to participate in achieving these goals. The firm suggests that to stimulate additional investment, three C’s will be required: collaboration, comprehensive focus, and corporate returns. Goldman Sachs has screened for buy-rated companies exposed to the green capex goals of decarbonization, infrastructure, and clean water that also meet the following criteria:

  1. Have favorable corporate financial returns versus peers
  2. Have estimated revenue exposure of at least 25% to green capex-related United Nations’ “Sustainable Development Goals”
  3. Are not in the bottom 20th percentile for the firm’s GS Sustain operational “Environmental & Social” score

Potential Winners from Green Capex

Here are ten companies that Goldman Sachs has identified as potential winners from green capex:

  1. Tech companies Check Point, Fortinet, Microsoft, and Palo Alto Networks are new additions to the firm’s list. Cybersecurity solutions company Fortinet’s shares have increased by 37% year to date. ESG funds are underweight on the stock, according to analyst Gabriela Borges. About 70% of analysts covering Fortinet rate it a buy or strong buy, according to Refinitiv data. The consensus analyst price target implies shares could rally almost 10%. Goldman also highlighted Palo Alto Networks. More than 80% of analysts covering the stock give it a buy or strong buy rating. Shares are up 41% in 2023.
  2. Electric vehicle maker Tesla has also made Goldman’s list. Shares have had a strong year, rallying more than 37%. Analysts see further upside of about 7% from current levels, according to Refinitiv data.
  3. The firm called out cell tower operator IHS Holding. Shares have gained 47% in 2023. However, the stock is down almost 10% over a 12-month period.

In conclusion, Goldman Sachs predicts that green capex will be a leading driver of global infrastructure over the next ten years. The investment bank has identified several companies that are well-positioned to benefit from this trend.


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