5 Undervalued Companies That Are Investing in Renewable Energy

Renewable energy seemed a casualty of the Trump administration’s efforts to massively reshape the electrical grid, as the president’s tax and spending bill reversed many of the climate solutions passed under the Biden administration. But at the corporate level, some companies continue to make a big renewables push.

For investors looking to support renewable energy, even if indirectly, a number of such stocks are trading at prices Morningstar analysts see as attractive.

Don’t Count Renewables Out

The legislation Congress passed in early July took dead aim at government support for industries that aim to wean the US economy off fossil fuels, posing “a major financial setback” to the rollout of renewables, according to Zach Stein, co-founder of Carbon Collective, an investment platform for climate solutions.

Still, while more than $14 billion of clean energy spending in the United States was canceled or delayed this year, ahead of the bill, the outlook isn’t as gloomy as it might seem at first glance.

• The bill still provides tax credit eligibility for a variety of clean energy sources, including nuclear. Indeed, Alphabet GOOG recently agreed to buy power from a planned fusion power plant in the 2030s from Commonwealth Fusion Systems.
• Renewables remain massively cost competitive. Lazard recently found that solar and wind energy projects are cheaper than fossil fuels, even without subsidies.
• Electricity demand is jumping. According to the Energy Information Administration, after remaining nearly flat for close to 20 years, electricity demand hit record levels in 2024. “In an energy-constrained world where AI, electrification, and reindustrialization and reshoring are driving demand, investors are looking for energy infrastructure that can scale and deliver under those constraints,” says Adam Bernstein, analyst at Gitterman Wealth Management. Hortense Bioy, head of sustainable investing research for Morningstar Sustainalytics, adds, “Clean energy is no longer just about combating climate change. It’s now a strategic enabler of the AI economy.”
• Companies are loathe to backtrack on environmental pledges, and continue to use renewables to meet their net zero targets. “Changing the zero-emission commitments would be a reputational risk,” says Bioy.

In the first quarter, renewables—comprising solar, wind, and battery storage—accounted for 99% of new generation capacity. “Looking longer-term, we believe wind and solar will steadily rise to over 40% of generation over the next decade, more than double current generation levels,” writes Morningstar equity analyst Brett Castelli.

This year, Alphabet, Intersect Power, and TPG Rise Climate began developing industrial parks with gigawatts of data center capacity in the US, co-located with new clean energy plants to power them. The first phase of the first co-located clean energy project is expected to be operational by 2026 and fully complete by 2027.

Writes Castelli: “We expect renewables to continue to make up the bulk of near-term capacity additions, along with natural gas additions and select nuclear restarts to help meet rising electricity demand.”

5 Highly Rated Stocks That Use Renewable Energy

In November 2024, we wrote about 5 Highly Rated Stocks That Use Renewable Energy, which discussed strategic corporate investment in renewable energy. Last year, for the first time, wind and solar alone produced more electricity than coal nationwide. Wind and solar produced a record 17% of US electricity (a 15% increase from 2023), enough to power 9.2 million additional homes. We’re revisiting some of the companies previously discussed and their progress against renewable energy targets.

We looked again at the holdings in the Morningstar North America Renewable Energy Index, which is designed to provide exposure to both users and providers of renewable energy in the Morningstar Developed Markets Americas Index.

Sleeve One includes companies that derive at least 5% of revenue from renewable energy. Sleeve Two includes companies that use renewable energy for at least 25% of their energy requirements, as measured by the Morningstar Sustainalytics Sustainable Activities Involvement Metrics. In Sleeve Two, we looked for companies with Morningstar Ratings of 4 or 5 stars, meaning our analysts believe they’re trading in undervalued territory.

Over 20% of the index is made up of technology stocks. Soaring AI usage and cloud computing needs mean tech companies are searching for innovative energy procurement solutions.

The Big Renewable Energy Users

Rogers Communications

Rogers Communications RCI is the leader in Canada’s wireless market, with over 30% market share, and it has continued to invest heavily in improving its network. Rogers carries a 5-star rating, has a narrow economic moat, and is trading at a 31% discount.

In its 2024 Climate Action Report, Rogers said that approximately 52.6% of its electricity use was generated from renewable energy sources, which included grid-sourced clean energy and renewable energy from its virtual power purchase agreement (up 2.6% from 2023 reporting).

A VPPA is a type of long-term energy contract (generally 10-20 years) between a developer of a specific energy project and a purchaser who desires renewable energy. Unlike a traditional corporate power purchase agreement, with a VPPA, there is no guarantee that Rogers is physically going to consume the renewable energy for which it paid a premium. However, a VPPA is still a strong signal that Rogers has a long-term strategy to source renewable energy and demonstrates the company’s commitment to sustainability. Elsewhere in its Climate Impact Report, Rogers describes improvements in energy use intensity and reduced market-based Scope 1 and 2 greenhouse gas emissions compared with its 2019 base year.

Alphabet

Alphabet carries a 4-star rating, has a wide moat, and trades at a 26% discount. The firm has built itself into a true technology behemoth, remaining at the forefront of a variety of verticals, including search, AI, video, and cloud computing.

Technology companies, especially those dominant in the energy-intensive cloud computing space, must grapple with energy procurement concerns. In 2020, Alphabet set a goal to run on 24/7 carbon-free energy on every grid where they operate by 2030. The company reported that in 2024, it reduced its data center energy emissions by 12% compared with 2023, despite data center electricity consumption increasing 27% year over year due to the growth of its business and growing product adoption, including AI.

Alphabet has invested in its increased data center energy consumption requirements through corporate PPAs. These are among the most optimal renewable energy solutions (behind onsite generation) because a purchaser can be sure that the energy it consumes comes directly from the renewable project it funds. PPAs are not accessible to every company because of consumption and contracting requirements and geographic availability.

From 2010 to 2024, Alphabet signed more than 170 corporate PPAs, totaling over 22 gigawatts of clean energy generation capacity. These purchases include agreements for over 17.3 GW in North America, over 4.5 GW in Europe, over 400 MW in Latin America, and over 300 MW in Asia Pacific. In October 2024, Alphabet was among the technology firms that announced nuclear power partnerships with small modular nuclear reactors. Google will sign a contract to purchase nuclear energy from multiple SMRs that Kairos Power, a nuclear technology company, plans to develop.

Additionally, Alphabet has entered a strategic partnership with Intersect Power and TPG Rise Climate to synchronize new clean power generation with data center growth. The firms will develop industrial parks with gigawatts of data center capacity in the US, co-located with new clean energy plants to power them. The first phase of the first project is expected to be operational by 2026 and fully complete by 2027.

General Motors

General Motors GM is an American multinational manufacturing company. GM’s growth exceeded the industry’s 3% increase, and retail sales—that is, nonfleet—rose 10% in the quarter for their highest total since 2016. General Motors carries a 4-star rating, has no moat rating, and is trading at a 30% discount.

In August 2024, General Motors signed a landmark solar power deal for three assembly plants. This was the company’s largest power purchase deal yet, which included a 15-year PPA with NorthStar Clean Energy’s Newport solar project, and was an important milestone in its goal to be carbon neutral by 2040.

Last year, GM’s renewable energy contracts covered 77% of its U.S. electricity usage, up from 59% in 2023. GM’s investments in renewable energy contributed to lower-emissions sources of electricity to grids in Michigan, Texas, Mississippi, Kentucky, Arkansas, Nebraska, Ohio, and Illinois. Globally, GM’s renewable consumption reached 52%, up from 39% a year earlier, as they progress toward the goal of hitting 100% renewable consumption in the next decade.

HP

HP HPQ is a technology company with a strong share in the personal computer and printer markets. It carries a 4-star rating, has no economic moat, and is trading at a 14% discount.

HP states that by 2025, it aims to use 100% renewable electricity to power its global operations. In 2023, HP reached 59% renewable electricity procurement, which meant it procured and generated around 300,000 MWh of renewable electricity globally (81% wind, 14% solar, and 5% other).

Most of HP’s operational GHG emissions stem from energy used to power its facilities. HP is focused on increasing its onsite generation of renewable power and procuring off-site renewable power through PPAs and renewable energy credits. To address other scope emissions, HP is also aiming to achieve a 100% EV company fleet by 2030 and decrease emissions associated with business travel by supporting the use of sustainable aviation fuel through the Eco-Skies Alliance program.

Salesforce

Salesforce CRM has established itself as the clear leader in software for all aspects of the customer relationship journey, and the rise of agentic AI should continue this trend. Salesforce carries a 4-star rating and a wide moat, and is trading at a 16% discount.

Salesforce has achieved 100% renewable energy procurement and maintains an interactive dashboard of all its projects. Most recently, the firm contracted with Qualitas Energy for 15 years to expand its energy portfolio with a new 27-megawatt solar portfolio in Italy. This marked the company’s first European VPPA. Additionally, Salesforce announced $3.95 million in new unrestricted philanthropic grants to seven organizations focused on advancing clean energy solutions. Salesforce’s Clean Energy Strategy lays out the guiding principles behind the renewable energy projects it invests in.