Happy Earth Day: Traders Share Top Environmentally Friendly Investments

John Sohm; Visions of America | Universal Images Group Editorial | Getty Images

Happy Earth Day!

In the spirit of the eco-focused occasion, CNBC's "Trading Nation" asked its traders to share their favorite green investments.

Michael Bapis, managing director at Vios Advisors at Rockefeller Capital, says exposure to companies that prioritize the environment is an important position in a portfolio.

"It's at the forefront of everyone's mind. People are focused on it more now than they ever have been," Bapis said Thursday. "And ESG investing appeals not only to older folks and investors but it also really appeals to the next generation of investors, and so that's why we believe it's here to stay. It's an important piece of a portfolio allocation."

ESG assets — those focused on environmental, social and governance issues — have an edge this year. The MSCI ESG ETF (SUSA), which tracks ESG companies, is up 11% in 2021. The broader S&P 500, by comparison, has risen 10%.

J.C. O'Hara, chief market technician at MKM Partners, added during the same interview, "If it is just a marketing ploy — which I don't believe — [but] if it is just a marketing ploy, it's working, because we're seeing, month over month, massive inflows going into these ESG products."

Rather than picking an individual stock, O'Hara says it makes sense to get exposure to a broad swath of environmentally focused companies.

"The preferred way to play the 'E' in ESG is looking at a diverse basket of clean energy stocks, and the ETF that I'm looking at right here is ICLN," O'Hara said. "It's an ETF that holds 100 global clean energy stocks, everything from hydro to solar to electric. They have representation from technology sectors, the utility sector, industrials, so it's a very diverse basket."

He says the technical set-up also looks strong for the ETF. Its rally began to peter out in January after a strong run off March 2020 lows. O'Hara says it has solid support at $21 and the near-term outlook sets it up for a push above $27. It closed Thursday just above $24.

Bapis identified two stocks not immediately recognized as environmental plays — Verizon and Microsoft. Verizon has spearheaded initiatives such as planting more than 20 million trees by 2030 and targeting net zero emissions in its operations by 2035. Microsoft is also targeting carbon neutrality in the same time frame.

"Verizon, from a valuation standpoint, is very cheap. There's a dividend that's yielding 4%-plus in an environment where yield is hard to get ... And then you have Microsoft, which is just dominating the market, and that's more of a momentum play. They've been rolling along, they're dominating their space, and I think they'll continue to do so," Bapis said.

Microsoft is up nearly 16% in 2021. Verizon has fallen more than 2%.

Disclosure: Michael Bapis and Vios Advisors hold shares of Microsoft. Vios holds shares of Verizon.


Copyright CNBC
Contact Us