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Environmental, social, and corporate governance (ESG) investing has taken the market by storm in 2021. With increased awareness about businesses’ societal and environmental impacts, many investors have begun retargeting their capital to support the firms looking to make the world a better place.

Since climate change and other issues aren’t going to be solved overnight, ESG investing looks like it’s here to stay. But apart from the moral side of this strategy, can it generate substantial returns for my portfolio? I certainly think so.

And there’s one business that has come back onto my radar that could be one of the best ESG investments of 2022 and beyond.

Saving the world… one fish at a time

Global warming is often foremost in people’s thoughts regarding the environment. Yet there are plenty of other areas where rapid change is needed. One, in particular, is the fishing industry. With humanity’s insatiable appetite to consume marine wildlife, conservationists are increasingly concerned about dwindling fish populations, water pollution, and habitat degradation.

To put in perspective how serious the problem has become, an estimated 70% of the global fish population has been depleted. That poses a serious threat to the global food supply over the long term. But Benchmark Holdings (LSE:BMK) claims to have found a solution.

This biotechnology company operates in a rising industry called aquaculture. This sector specialises in breeding fish specifically for human consumption. And, in turn, reduces the reliance on capturing wild fish from the oceans.

Benchmark has been using its scientific expertise in genomics to breed fish that are resistant to most diseases. At the same time, the group has developed its own specialised feed that improves mortality, as well as researching new medicines for treating infected fish.

The end result is a higher quality food source for humans without depleting and damaging the ocean environment. To me, that sounds like an excellent candidate for an ESG investment. But while the cause is noble, is this a high-quality business?

An ESG stock worthy of investment in 2022?

Benchmark recently released its full-year results. And, in my opinion, there is reason to be excited. Revenue over the last 12 months grew 18%, reaching £125.1m. Meanwhile, ignoring the effects of exceptional items, adjusted operating profits shot up 37% to £10.8m.

Needless to say, that’s quite an impressive level of growth. And with the demand for the group’s solutions bound to increase exponentially in 2022 and beyond, I don’t think this upward trend will be slowing down anytime soon.

However, like all investments, this ESG stock is far from risk-free. While underlying earnings may be in the black, the bottom line isn’t. And it hasn’t been for several years. An unprofitable young enterprise is hardly an uncommon sight.

And to stay afloat, management has racked up a considerable amount of debt. A good chunk of the firm’s outstanding obligations is maturing within the next two years. And while the company has outlined a plan to renew or replace these credit facilities, additional capital might need to be raised through equity, causing dilution.

But even with this caveat, Benchmark looks like it’s perfectly positioned to benefit from some solid future tailwinds in the aquaculture industry. That’s why I think it could be one of the best ESG investments for my portfolio in 2022.

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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Carnival (LSE: CCL) shares have been one of the biggest losers of the past 18 months. The company’s revenues plunged to near zero as the pandemic grounded the cruise industry last year. Investors did not waste any time jumping ship. 

Since the beginning of 2020, the stock has plunged by nearly 70%, and since the beginning of 2018, the stock is off 80%. 

But with the world slowly starting to move on from the worst of the pandemic, the outlook for Carnival is looking up. Over the next couple of years, the stock should begin to reflect the firm’s improving operating performance.

Recovery in progress 

While the pandemic is still raging in many regions of the world, testing and vaccination programmes have helped most industries open up. That includes the cruise industry. 

Carnival’s revenues totalled $546m, up 1,666% year-on-year for the quarter to the end of August. That is a far cry from the near $5bn a quarter in revenues the group reported before the crisis. But it is a start.  

The company’s future depends on what course the pandemic takes over the next five years. 

In the best-case scenario, the coronavirus will become less infectious, allowing the world to return to normal. However, in the worst case, the virus may continue to mutate into more infectious and damaging strains. 

If it is the latter, I think Carnival will struggle to return to its former glory. There will likely continue to be a market for cruise holidays, but with strict testing and vaccination requirements. This could put a lot of consumers off. 

I believe the most likely outcome is somewhere in the middle. The pandemic may continue to affect demand for cruise holidays in 2022 and 2023. But consumers should continue to return, although it will take some years for revenues to return to pre-pandemic levels. 

The outlook for Carnival shares 

The most important benchmark for Carnival will be a return to profit. Last quarter, the group reported a loss of $2.8bn on sales of $564m. These numbers suggest when sales return to around $3.5bn, the firm will be back in the black. Clearly, there is a long way to go before the company hits this target. 

Nevertheless, if the group can hit this target in the next five years, I think the stock is worth at least book value. In theory, any corporation that is not losing money deserves to trade at or above book value. Carnival’s book value per share, according to the company’s latest figures, is 986p. This implies the stock looks expensive at current levels. 

If Carnival can return to profit faster, the stock could be worth more than this target within half a decade. I think that is a big ask, especially considering all of the uncertainty surrounding the pandemic. 

As such, I am not going to be buying the stock for my portfolio today. I think there is just too much uncertainty surrounding the outlook for the business. 

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Renewable energy stocks have grown in popularity over the last few years. And following the COP26 summit, I’m looking at whether I should invest in the sector.

Why I’m looking at renewable energy stocks

There’s a compelling investment case for renewable energy stocks. Not only is this an ‘ethical’ sector, but this area is likely to benefit from widespread government support over the next decade.

According to an IEA report, though $750bn should be spent globally on clean energy technologies in 2021, spending would have to increase significantly to meet the 1.5% cap on temperature rises. This level of investment is likely to mean that this sector should enjoy substantial gains over the coming years.

What I’m looking at

I could invest in individual renewable energy stocks, but I like the idea of using an exchange traded fund (ETF). This allows me to invest in several companies while holding just one share.

The one I’m considering is iSHARES Global Clean Energy UCITS ETF (LSE: INRG). This ETF aims to track the performance of the S&P Global Clean Energy Index. It’s designed to measure the performance of companies in global clean energy-related businesses from both developed and emerging countries, while also taking into account the carbon footprint of these companies.

Looking at the fundamentals, this ETF is large at over $6bn, established (launched in 2007) and has good trading volume. I think the ongoing charge of 0.65% is reasonable.

Presently the ETF has 76 holdings. 44% is in US companies, while Chinese firms account for around 4.5% and investment in UK entities presently stands at just under 4%. I like the fact this ETF is diversified in terms of countries and companies. If any individual company fails or there are certain country-specific problems, the ETF should hold up pretty well. It also pays a small dividend, which currently stands at 0.73%.

Am I going to invest?

Year-to-date performance hasn’t been good, however. Currently, the fund is down around 15% this year and is about flat over a 12-month period.

The subdued 12-month performance could be due to a variety of reasons. Some of the US companies in this fund have most likely suffered because of bad weather affecting their output and hence their earnings (for example, in Texas). Also, the energy supply squeeze all around the world at the moment may have seen money move into more traditional energy companies.

However, over the last five years, the fund is up around 180%. I take this as an affirmation of the long-term credibility of this ETF.

Although some investors may feel differently, overall, I think that this ETF might be one of the best ways for me to invest in renewable energy stocks. I believe this sector can perform strongly over the coming decades and am upbeat about this ETF. For this reason, I will be seriously considering adding iShares Global Clean Energy UCITS ETF to my portfolio.

Niki Jerath does not own shares in iSHARES Global Clean Energy UCITS ETF. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

I’m searching for the best cheap UK shares to buy as the stock market begins to crash. Here are two top penny stocks near the top of my shopping list.

A penny stock for the EV revolution

It’s obvious by now that electric vehicle (or EV) sales are set to explode over the next decade. Major carmakers are doubling down on the production of low-emission vehicles, a trend that bodes well for suppliers of key EV materials. This is why I’d buy Rainbow Rare Earths (LSE: RBW) for my shares portfolio.

This stock owns the high-grade Gakara neodymium and praseodymium project in Burundi, East Africa. These elements are then used to make the magnets that propel EVs along. To give an indication of the size of the market, the International Energy Agency (IEA) thinks electric car sales will surge to 15m in 2025 and 25m in 2030. This compares with the 3m low-carbon vehicles that rolled out of showrooms last year.

Buying mining shares like Rainbow Rare Earths can be risky business. Unexpected production problems can be commonplace, driving costs higher and hitting revenues hard. Still, it’s my opinion that the potential rewards on offer at this particular miner offset the dangers.

Golden oldie

The Old Mutual (LSE: OMU) share price fared particularly badly in November. It’s fallen a meaty 18% in just a fortnight as a direct result of the ongoing public health emergency. Investors first raced for the exits when the insurer warned it had taken a hit of ZAR6.6bn in the nine months to September due to excessive Covid-19 deaths.

The news worsened the sense of panic around Old Mutual when it subsequently emerged that the Omicron virus variant was spreading rapidly in Old Mutual’s key territory of South Africa. As I type, the financial services provider is now trading well inside penny stock territory blow 57p.

I think this recent drop could provide a decent dip-buying opportunity for me, however. The ongoing pandemic is something that shouldn’t be underestimated. But as a long-term investor there’s a lot I like about Old Mutual. First, I like its position as one of Africa’s most trusted brands, a critical quality when it comes to looking after people’s money.

8% dividend yield!

I also think profits here could jump because of rising wealth levels and historically-low financial product penetration in its emerging markets. Financial institutions in Africa now hold a whopping $1.41trn worth of assets, according to Statista.

Old Mutual now trades on a price-to-earnings (P/E) ratio of just 7.6 times for 2022. This is the sort of value for money that warrants serious attention in my book. Meanwhile the financial giant also sports a dividend yield just under 8%. Like Rainbow Earth Minerals, this is a penny stock I’m seriously considering loading up on today.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The recent discovery of another strain of Covid has already given the market jitters. My thinking is that shares with a high dividend yield can offer good protection against a stock market crash that might be on the cards. In many cases, stocks that offer a high yield can be a safer bet than growth stocks. They should be less volatile as investors may hold on to them for the dividend stream, instead of bailing out when the market declines.

But rather than picking individual dividend-paying shares, I’m looking at an exchange traded fund (ETF).

ETFs are funds that track an index or sector and can be bought and sold like shares through most online brokers. They allow me to invest in multiple companies in a single fund and are usually low-cost. 

The ETF I’m looking at

SPDR S&P Global Dividend Aristocrats UCITS ETF (LSE: GBDV) is one I’ve been considering for a while. Its aim is to invest in global high-dividend-yielding companies by tracking the S&P Global Dividend Aristocrats Quality Income Index. 

This index aims to track global companies that are over $1bn in market capitalisation, that have maintained or increased dividends for at least 10 consecutive years, while at the same time having a positive return on equity and cash flows from operations.

This ETF is a good size at over $700m and is relatively low-cost. For my portfolio, diversification is one of the ways I try to reduce risk and this ETF ticks all the boxes across companies, countries and sectors.

First, there are around 100 companies in this fund, with no company having more than 3% weighting within the ETF. There are some household names in there like Exxon Mobil Corp and GlaxoSmithKline. Second, the fund is geographically diverse. Some 45% is invested in US companies, around 8% is invested in both the UK and Japan, while other holdings come from all around the world. Finally, I like the fact that sectors as diverse as banking, utilities and insurance are covered. 

Am I going to invest?

The dividend yield is currently around 3.7%, which is a reasonable return. If the market declines, I think this may encourage other investors to hang on to this ETF for the dividends. If so, it will be less volatile than other funds or shares out there.

I feel that this ETF can act as a safety buffer for me in uncertain times. That’s because with this fund holding only those companies that have sustained or increased dividends over 10 years, I’d feel more confident holding on to this ETF if the stock market crashes.

However, it’s not risk-free. Dividends can be reduced at any time and not all high-dividend shares are winners. Some companies maintain high dividends to keep their investors happy when the company isn’t actually growing. In the long run, firms like these are likely to fail.

That said, I believe diversification is important to my portfolio. Although other investors may disagree, I think a dividend-paying ETF like this can be a good addition in case of a stock market crash. I’m going to seriously consider adding it to my holdings.

Niki Jerath has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

In November, the worst performing FTSE 100 stock was Darktrace (LSE:DARK). The Darktrace share price fell 40%, to end the month at 465p. Clearly, this was a large drop for a company that only went public this spring. Having seen a strong lift higher in the summer, the shares are in a firm downtrend, with the company in danger of dropping out of the FTSE 100. 

Early stage investors selling out

One reason for the fall in Darktrace shares has been the end of the lock-in period for investors related to the IPO. Usually, when a company goes public, the early stage investors have an agreement where they can’t sell their shares for a period of time. Common periods include six or 12 months after the IPO date. This is a protective measure to prevent share dumping as soon as it goes public as investors try and cash out.

Although the lock-in is good for the initial period, it can be an issue when it ends. This has been the case for the Darktrace share price. The six month grace period ended in November. Several large investors chose to sell shares as this finished, causing a large amount of pressure on the share price.

Some could argue that this is an artificial move on the shares. It might not reflect the long-term trend of the business. However, if early investors are choosing now as the time to cash out, it should sound some alarm bells.

Negative broker report

Another reason for the dump in November was a continuation of the fall from late October following the release of a report by broker Peel Hunt. It caused the Darktrace share price to fall 15% in a week, as I wrote about in early November. 

The report forecast a fall in the shares to 473p, at a time when it was trading around 800p. This is a level that has been met in recent days.

Concern was raised around two main points. Firstly, Peel Hunt said that “we…see a disconnect between the valuation and the ultimate revenue opportunity”.

Secondly, it said that “having considered the potential market size, the intensifying competition, and Darktrace’s limited R&D spend, we take a more grounded approach to our valuation”. This grounded approach turned out to be a target price of 473p.

The impact of the report rolled into November as investors digested the full contents.

The share price in December

The regular quarterly review of the FTSE 100 constituents will be concluded in coming days. This will see a reshuffle, with potential demotions based on market capitalisation. Given the fall in the share price, Darktrace could slip to the FTSE 250.

This could put further pressure on the shares as funds that can only hold FTSE 100 stocks need to offload their shares. The move to the FTSE 250 isn’t guaranteed, so we’ll have to wait and see what happens in December.

Jon Smith and The Motley Fool UK have no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The Wise (LSE: WISE) share price has been on a bit of a rollercoaster since the company went public earlier this year. The shares listed directly on the London Stock Exchange and began trading at 800p. By September the share price had reached 1,150p, but quickly fell back down to earth and was as low as 700p in November.

Just yesterday though, the shares rebounded over 10% at one point after the company released its half-year report. Does this represent a turning point in the Wise share price? Let’s take a look to see if I should buy the stock for my portfolio.

Recent Wise share price weakness

As a quick recap, Wise is a FinTech company that offers cross-border money transfer services. I’ve used the platform myself when converting sterling into both euros and dollars, and thought the service was excellent. The cost for transferring was also competitive.

I think there are two reasons for the recent share price weakness, the first being competition. FinTech is an exciting sector at present. But this means competition will also be hot. Companies must have wide economic moats if they’re to retain market share.

With this in mind, the Wise share price fell a steep 8.5% on one day alone in October. This came after three clearing houses said they were working with major European and US banks to make cross-border payments as fast as domestic equivalents. There are also numerous other FinTech companies vying for position in the currency transfer market, such as Revolut and Equals.

I also think Wise has a steep valuation. The forward price-to-earnings ratio is very high at 131 based on current forecasts. The share price fell almost 7% when the company released its second-quarter trading update in October, even though revenue grew 25% year-on-year. Price reductions also meant its margin on currency transaction volume decreased. I do think that, with such a high valuation, growth will have to remain significant if the share price is to rise from here.

Improving results

In the half-year report yesterday, the company said it now expects revenue growth to be in the mid-to-high 20s on a percentage basis. The previous consensus estimate was for revenue growth of 25%, so this represents a small upgrade on prior forecasts.

There’s been some concern over Wise’s pricing strategy recently as the company has been reducing transfer costs for customers. As mentioned, in the second-quarter update, its revenue generation on total transaction volume had declined. The company now expects this to continue into the second half of the year. However, Wise has been able to reduce its own costs, most notably as the gross margin expanded from 62% to 68%. Together with the upgrade of its revenue forecast, it says to me that Wise’s pricing strategy is working.

Are Wise shares a buy?

I view Wise favourably as a user of its platform. It’s very easy to use, and its pricing is competitive. However, my concern is that it needs to remain competitively priced if it’s to retain market share from other businesses offering very similar services. On top of this is the high valuation that does increase the risk of investment. So I’m not going to buy the shares today. I think there are other growth stocks worth considering first.

Dan Appleby owns shares of London Stock Exchange. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.