Rising commodity prices, increased regulation and a growing recognition of the benefits of sustainability are expected to be “important catalysts” for the circular economy, Goldman Sachs said, naming its “Conviction List” stocks designed to address the issue. The circular economy is a system that aims to keep materials and resources usable for as long as possible, with an emphasis on reuse rather than disposal. “While regulators, businesses and investors have placed great emphasis on achieving net zero emissions and biodiversity targets, we believe the critical role a circular economy will play in solving both of these issues has been overlooked, particularly as there is a shortage of available resources threatens the speed, scale and affordability of a transition to clean energy,” Goldman analysts wrote in a Nov. 2 note. Citing estimates from McKinsey, Accenture and the United Nations Environment Program, the bank said the economic benefits of the circular economy will be between $2.9 trillion and $4.5 trillion by 2030. Conviction List: Stocks The bank named a number of “key stocks exposed to the issue.” , including Dassault Systèmes and SMC Corporation. Both are on the bank’s “conviction list” with the stocks with the highest buy recommendation. The investment bank called Dassault Systems a “digital enabler of the circular economy” and said it “has defined the product lifecycle market with its platform approach that includes design, collaboration, simulation and manufacturing in one platform.” The analysts said the company has a competitive advantage in launching new products and services, adding: “Dassault sees multi-year growth tailwinds from the sustainability theme as it is a key partner and enabler for its customers in achieving sustainability goals. ” .” The bank has given the stock a “buy” rating with a 12-month price target of 57 euros ($60.82), representing a potential upside of 40% from its Nov. 9 closing price. Goldman analysts also value the Japanese engineering company SMC Corporation under this theme. They give a price target of 103,000 Japanese yen (925.79 USD), which corresponds to an upside potential of around 35%. The analysts note that the stock “compared to “seems slightly undervalued compared to other global factory automation companies” and also value the efficiency of their products. “Our analyst expects demand for these products to grow, supported by a greater focus on sustainability,” they added. Other global stocks on Goldman’s shortlist that are likely to benefit from the circular economy include Japanese electronics giant Hitachi, Dutch conglomerate Philips and US waste management company Republic Services, with all three also on the bank’s conviction list. —CNBC’s Michael Bloom contributed to this report.
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