2 under the radar ASX shares for the eco-friendly investor

It's possible to invest in ASX shares to create wealth and, at the same time, have a positive environmental and social impact.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

With more than 40 coal mining companies, the ASX is littered with heavily polluting and not-so-environmentally-friendly businesses. How good would it be if we could make money on the share market while also having a positive environmental impact?

Two under the radar, yet eco-friendly ASX companies within the energy renewable sector are New Energy Solar Ltd (ASX: NEW) and Infigen Energy Ltd (ASX: IFN).

New Energy Solar

With 16 plants in operation in Australia and the US, New Energy buys and develops large-scale solar plants with long term distribution contracts. New Energy has just inaugurated its 16th plant, which is set to increase its overall production capacity by 70%, from 454MWDC in the previous year to 772MWDC. Further, most of New Energy's production is contracted out to reliable off-takers for a weighted average length of 16 years.

New Energy was listed in December 2017 and has now a market cap of $484 million and a price-to-sales (P/E) of 20. It is currently trading at a discount to its net asset value (NAV), which was last measured at $1.55 per share. The discount to NAV indicates that this could be a good time to purchase shares, which also come with a juicy dividend yield of 5.8%.

Something to be aware of is that New Energy is managed by an external asset manager. This means that the company must pay an annual management fee, as a percentage of enterprise value, and an acquisition and disposal fee. Due to the fee setup, there is some concern that management might take on projects just to increase its fee revenue, rather than creating shareholders value.

Infigen Energy

Infigen has been shifting from being an owner of wind farms and wholesale distributor to becoming a vertically integrated utility. Infigen has a current operating capacity of 600-700MW through its 9 wind farms (7 fully owned) and firming assets. Management recently stated that it's aiming to increase its energy production to 1300-1400MW, with up to 75% of that contracted out long-term. 

Infigen is the fifth-largest utility on the ASX with a market cap of $645 million. At its current price, Infigen shares can be acquired at a P/E of 15, which is much lower than the median utilities sector P/E of 31. It currently pays a dividend of around 3%, which is well covered by earnings and by a conservative payout ratio of 46%.

Foolish takeaway

So there you have it, two eco-friendly ASX shares to consider if you're looking to create wealth while maintaining a positive environmental and social impact. Out of these two companies, my preferred pick would be Infigen as I am not a fan of New Energy's external management.

Motley Fool contributor Giacomo Graziano has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A young woman slumped in her chair while looking at her laptop.
Share Market News

Here are the top 10 ASX 200 shares today

It was a lacklustre day of trading for ASX investors this Thursday.

Read more »

A young woman sits with her hand to her chin staring off to the side thinking about her investments.
Share Market News

Buy these top ASX 300 dividend stocks today for an income boost

Analysts are feeling bullish about these income options.

Read more »

a small child holds his chin with his head on the side in a serious thinking pose against a background of graphic question marks and a yellow lightbulb.
Share Market News

Costs and lack of skilled labour delay innovation among Australian businesses

Less than half of Australian companies implemented some type of innovation in FY22 and FY23.

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why James Hardie, Mader Group, MMA Offshore, and WA1 shares are dropping today

These shares are having a tough time on Thursday. But why?

Read more »

A young bearded man wearing a white t-shirt with a yellow backdrop holds up his arms to his chest and points to the camera in celebration of ASX shares rising today
Share Gainers

Why Bigtincan, DroneShield, Guzman Y Gomez, and Helia shares are racing higher

These shares are having strong sessions on Thursday. But why?

Read more »

Happy man at an ATM.
52-Week Highs

2 ASX 200 bank shares smashing new multi-year highs today

Here we go again...

Read more »

A happy investor sits at his desk in front of his laptop and does the mexican wave with his arms to celebrate the returns from his ASX dividend shares

Who owns Guzman y Gomez shares?

Holy Guacamole! These investors have a lot of money in Guzman y Gomez shares.

Read more »

Modern accountant woman in a light business suit in modern green office with documents and laptop.
Financial Shares

Beaten-up ASX 200 stock rebounds 15%. Macquarie says more to come

The sell-off could be unfounded, one broker says.

Read more »