With so much talk about environmental, social and governance (ESG) investing, it’s easy to understand how some investors gloss over other concepts with environmental implications.
The VanEck Vectors Environmental Services FNB (EVX) is an example of an exchange traded fund that’s in this boat, but it shouldn’t be. It’s not for lack of age as EVX turns 15 next week, and while ETF VanEck isn’t making the headlines, it’s more relevant today than many investors think.
EVX tracks the NYSE Arca Environmental Services Index, which features companies engaged in waste transportation, recycling services, wastewater management, and environmental consulting services, among others. These aren’t glamorous or sexy industries, but what’s captivating about EVX is that it has grown by almost 44% in the past 12 months.
“The environmental services industry is an integral part of the economy that can be overlooked and underestimated by investors,” says Samir Barjon, analyst at VanEck. “According to VanEck research, the US-listed environmental services opportunity set generated $ 78.1 billion in 2020, up from $ 65.8 billion in 2015. from customers including single-family homes, massive retail and industrial operations.
EVX allocates more than 21% of its combined weight to Republic Services (NYSE: RSG) and Waste Management (NYSE: WSM) – two of the dominant names in waste transportation. Again, this is not a glamorous business, but it is a business with deep environmental implications. Additionally, some EVX components are more cutting edge and tech savvy than many investors think.
“Casella Waste Systems implemented the first zero-sort recycling system that helps customers and communities reduce costs and facilitate participation by placing all recycled materials in one bin,” says Barjon. “In partnership with AMP Robotics, (Waste Connections) plans to deploy 24 AI-guided robotic systems to recover recycled materials recovered as raw materials. The technology recovers plastics, cardboard, paper, cans and many other types of packaging recovered for processing raw materials.
Waste Connections and Casella combine for 12.1% of the EVX list. In addition, the industry is ripe for consolidation. While some EVX member companies have dominant market shares in their respective segments, some environmental services are fragmented with smaller players who are potentially attractive takeover targets.
“Mergers, acquisitions and consolidation activities could provide a new boost to revenues and growth in the environmental services industry in the coming years. While a few select names have dominated the majority of the market share, there are still many idiosyncratic opportunities in the market, which are seen as growth opportunities for large companies, ”concludes Barjon.
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The opinions and forecasts expressed herein are solely those of Tom Lydon and may not come to fruition. The information on this site should not be used or interpreted as an offer to sell, a solicitation of an offer to buy or a recommendation for any product.