The Nicola Wealth Public Assets team aims to consider the environmental, social and governance (ESG) risks and opportunities inherent in their investment decisions. One example is Air Products and Chemicals, Inc. (APD), a stock held in the Nicola U.S. Equity Income Fund. Founded in 1940, the Pennsylvania-based company has long supplied customers with bulk gases and liquid chemicals, operating in sectors ranging from industrial, refining, health care and electronics, while also operating on-site gas supply facilities for large consumers. The growth of this legacy business mostly mirrors GDP growth.
But there is another side of APD. “They are relatively proactive in developing hydrogen, gasification, carbon capture and storage technology and infrastructure,” says equity analyst, Caleb Ho. With over 110 facilities and nearly 9,000 tonnes per day of hydrogen production capacity, the firm is making a real-time contribution to the global economy’s transition from fossil fuels to low- and zero-emission sources of energy.
“Because of their innate knowledge of the hydrogen economy, they are able to bid on and execute various green and blue hydrogen infrastructure projects to ultimately deliver carbon-free and low-carbon hydrogen solutions,” Ho explains. APD’s list of contracts in progress includes the sizable NEOM project in Saudi Arabia as well as hydrogen megaprojects in Alberta, Louisiana and Arizona.
Beyond these external efforts, APD has its own internal ESG targets. For instance, it vows to cut its Stage 1, 2 and 3 emissions by a third by 2030, a pledge it branded “Third by ’30.” In addition, by 2050, the company plans to be fully carbon-neutral. Furthermore, APD is in the midst of a nine-year, US$15-billion capital spending program committed to the energy transition.
Anytime a blue-chip company dives into a new market there are going to be risks. “It’s a long-term investment,” Ho says of APD’s foray into green hydrogen. The return, he says, “will take time to materialize”. It is a prime example of a stock that he feels fulfills several criteria, capitalizing on the ongoing energy transition trend and positioned to deliver above-market returns. “This is where we want our portfolio to go in terms of ESG considerations,” says Ho.
This material contains the current opinions of the author and such opinions are subject to change without notice. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. This investment is intended for tax residents of Canada who are accredited investors. Residency restrictions apply. Please read the relevant documentation for additional details and important disclosure information, including terms of redemption and limited liquidity. All investments contain risk and may gain or lose value. Please speak to your Nicola Wealth advisor for advice based on your unique circumstances. Nicola Wealth Management Ltd. (Nicola Wealth) is registered as a Portfolio Manager, Exempt Market Dealer and Investment Fund Manager with the required securities commissions.
