These 8 Small-Cap Impact Stocks Tap into the Rapidly Growing Climate Tech Market in Support of a Net-Zero Future

In recent years as more and more Millennials have begun investing in the stock market, there's been an increasing interest in investing specifically in companies whose work provides positive impacts on the world. While the idea of impact investing continues to evolve, one clearly defined piece of the puzzle involves supporting companies involved in improving the environment in some way.

Of course, much attention has been paid to clean tech, sending stocks like Tesla (TSLA) through the roof, but now climate tech is starting to capture the attention of an increasing number of investors. Climate tech goes beyond environmental friendliness, instead directing focus and investments specifically on the technologies and services needed to support global decarbonization — and eventually, a net-zero future.

Climate-tech market slated for exponential growth

The size and number of investment opportunities specifically in climate tech are growing rapidly. The International Energy Agency (IEA) estimates that this year will bring $1.7 trillion worth of investments in deploying renewable energy, grids and other clean-energy technologies—a new all-time high that follows six straight years of increases.

Additionally, BloombergNEF reported that climate tech investments rose to $16.6 billion just in the third quarter of 2023 alone. In fact, the need for all those investments has never been higher than it is now, and it will continue to grow.

According to the IEA's Net-Zero Roadmap, a little more than one-third of the emissions reductions expected to occur by 2050 depend heavily on climate technologies that are currently still being developed. Thus, much more needs to be done to support the development of those crucial technologies so that the agency's projections for reaching net-zero status on carbon emissions are not delayed.

However, there's excellent news here, which is that many publicly traded companies are working on various technologies that will indeed help make a net-zero environment a reality.

Here are eight small-cap impact stocks that will enable investors to tap into the rapidly growing climate tech market — all while supporting a brighter future for our planet and future generations.

FuelCell Energy

FuelCell Energy (FCEL) manufactures stationary fuel-cell platforms to help with decarbonizing power and producing hydrogen using fuel cells. On its website, the company describes a fuel cell as "a device that makes electricity from fuel and air by causing a reaction electrochemically — without the combustion that generates carbon dioxide by burning fuel to create heat.

FuelCell's proprietary technology captures and concentrates carbon dioxide using its carbonate fuel cells. The company specifically targets large industrial sources like factories and other large facilities that produce significant amounts of carbon dioxide.

It describes its impact or mission as "helping organizations and communities around the world develop a safe, secure and practical journey to net-zero by decarbonizing power and producing hydrogen."

Gevo

Gevo (GEVO) produces decarbonized fuels and chemicals. More specifically, the company states it is "commercializing the next generation of renewable gasoline, jet fuel and diesel fuel with the potential to achieve zero carbon emissions, addressing the market need of reducing greenhouse gas emissions with sustainable alternatives.

Currently, Gevo is focused primarily on producing sustainable aviation fuel. However, it also sees commercial opportunities for other renewable hydrocarbon products like renewable natural gas and other fuels, chemicals, and plastics. Gevo is also targeting large-scale deployments of net-zero hydrocarbon fuels and chemicals.

The company uses low-carbon carbohydrates based on renewable resources as raw materials and is developing renewable electricity and natural gas for use in production, leading to low-carbon fuels with dramatically reduced carbon intensity.

Ideal Power

Ideal Power (IPWR) has developed and patented a bidirectional semiconductor power switch designed for use in electric vehicles, EV chargers, renewable energy, energy storage, data centers, solid-state circuit breakers, and other industrial and military applications. The Bidirectional, Bipolar Junction Transistor, or B-TRAN™, is highly efficient and eco-friendly, making it perfect for such applications. As two examples, utilizing the company’s technology improves the range of EVs and the kilowatt hours harvested from a renewable energy installation.

B-TRAN™ is a unique, double-sided bidirectional switch capable of significantly reducing conduction and switching losses, complexity of thermal management, and operating costs in AC power switching and control circuitry. Due to its bidirectional design, a single B-TRAN™ can replace two or more conventional power switches in many applications, making those devices operate more efficiently and thus improving their energy efficiency.

Ideal Power also recently launched its SymCool™ IQ Intelligent Power Model, which also utilizes its B-TRAN™ bidirectional power switch.

Mullen Automotive

Mullen Automotive (MULN) is an EV manufacturer that designs and builds commercial trucks, passenger vehicles and solid-state polymer battery technology. Interestingly, while most other EV makers build cars that use lithium-ion batteries, Mullen actually uses lithium-sulfur batteries, describing them as being "lighter, more efficient," and having "greater range than most EVs in the market."

At this stage, it's still the very early days for Mullen Automotive, although it did see its first recorded revenue in June from the sale of 22 electric cargo vans to the Randy Marion Automotive Group. The company also recently announced that it was expanding its U.S. battery operations and moving to solid-state polymer pack testing.

OPAL Fuels

OPAL Fuels (OPAL) provides complete renewable natural gas solutions for landfills, dairies, and fueling station construction and service. The company uses a vertical waste-to-energy model that combines the upstream production and downstream marketing and distribution of renewable natural gas, providing a scalable, low-cost solution to decarbonize heavy-duty transportation.

OPAL Fuels produces its renewable natural gas by capturing methane emissions at their source, purifying them, and then using the energy created to replace diesel and other fossil fuels with high carbon intensity. The company touts itself as one of the largest U.S. suppliers of renewable natural gas with more than 200 million gallons expected over the next five years.

So far, OPAL Fuels has completed more than 350 fueling stations, renewable natural gas landfills, and dairy projects across the U.S. On its website, the company highlighted its partnership with Paloma Dairy, which generated over 500 dekatherms of renewable natural gas per day by capturing methane emissions from the dairy.

Sunworks

Sunworks (SUNW) describes its mission as "to help businesses and homeowners take control of their electric costs while championing the future of solar — the world's most abundant alternative energy source." The company serves customers in 15 states and provides solar services via partner organizations.

Among its recent achievements, Sunworks signed an agreement with one of its existing solar photovoltaic customers focusing on installations of commercial-grade EV charging systems. The company serves solar customers across the spectrum, covering the residential, commercial, agricultural, public works, and industrial markets.

Sunworks also provides energy storage solutions that work with its commercial solar systems, enabling customers to store the excess solar energy they generate during the day for use at a later time when not enough energy is being generated.

The Metals Company

The Metals Company (TMC) is supporting the shift to green energy by developing the largest estimated resource of metals needed for EVs and low-carbon energy. The company describes its mission as “to build a carefully managed metal commons that will be used, recovered and reused again and again.”

In pursuit of this goal, the company mines polymetallic nodules, which are rich sources of the base metals required for battery making and building the infrastructure needed to make the energy transition. In fact, The Metals Company believes mining these nodules could have a much lower environmental footprint than other forms of mining necessary to obtain the metals needed for making batteries. 

Polymetallic nodules are also known as manganese nodules, although they also contain three additional critical metals used in batteries. In addition to manganese, these nodules contain cobalt, nickel and copper, all in a single ore. They are found unattached to the bottom of the abyssal seafloor, and they don’t contain toxic levels of heavy elements like land ores do.

Workhorse Group

While there are many EV manufacturers of all sizes and stages to choose from, Workhorse Group (WKHS) stands apart from the generalists in the space by manufacturing electric trucks and drones to support last-mile deliveries. After all, e-commerce has been growing rapidly and is surely here to stay, and all those delivery trucks on the road are generating large amounts of carbon dioxide and greenhouse gas emissions.

In September, Workhorse announced that it had received approval from the Internal Revenue Service as a qualified manufacturer for the Commercial Clean Vehicle Credit. The approval means Workhorse customers are eligible for a credit of up to $40,000 on their purchases of all Workhorse vehicles in 2023 and beyond. 

Investing in climate tech

The small-cap end of the publicly traded market is filled with climate tech companies that offer a wide array of solutions for multiple problems that all contribute to solving the current issue of high carbon emissions and greenhouse-gas generation. In fact, the sheer number of companies working on solutions to help tackle the issue of climate change is so large that it was difficult to narrow down a list of companies to include.

However, the large number of solutions in the works is encouraging as we continue the net-zero transition. Of course, investors are always advised to do their due diligence before investing in any stock or industry.

Ari Zoldan is CEO of Quantum Media Group, LLC. Ideal Power is a client of Quantum Media Group.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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