The environmental services sector is a multi-billion-dollar industry, which includes companies that collect and dispose of hazardous and non-hazardous types of waste and pollutants. Waste can include toxic waste in soil and water, as well as medical waste, trash, and sewage.
Companies in the environmental services industry include waste treatment plants, landfills, sewage systems, incinerator operators, testing and analysis services, and companies that provide technologies to deal with radioactive waste and other specialized areas.
The environmental services sector may offer a wide array of potential investment opportunities, thanks to an active regulatory climate, as well as growing corporate and consumer commitment to sustainability goals in the U.S. and abroad.
Key Points
• Environmental services is a multi-billion-dollar industry; it includes companies that collect and dispose of hazardous and non-hazardous waste.
• Waste can include consumer refuse, toxic waste in soil and water, as well as medical waste, sewage, and more.
• Environmental services also encompass a number of subsectors that range from testing to engineering, consulting, development, and more.
• Owing to the rising concern about environmental impacts, there is a robust regulatory climate that has helped shape and spur the growth of this sector.
• Given that continued population growth and urbanization are adding to the increase in waste and pollution, environmental services may see commensurate demand over time.
What Is the Environmental Services Sector?
Environmental services generally encompass infrastructure-based organizations and public utilities, such as sanitation and sewage processing, as well as water and wastewater treatment, and recycling.
Environmental services can also include non-infrastructure services that deal with air, water, ground, and noise pollution, as well as contaminated site remediation.
The removal and treatment of medical and hospital waste is another important environmental services function.
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Subsectors of Environmental Services
While environmental services are often couched as waste management, it’s important to remember that environmental services encompass a number of subsectors that range from testing to engineering, consulting, development, and more. These companies prevent and reduce pollution to the air, land, cities, and waterways.
Environmental services subsectors include:
• Testing and analysis for pollutants and chemical contaminants, which is an important part of regulatory compliance, as well as ensuring baseline environmental protections.
• Environmental engineering and project management services, which support sustainable infrastructure development, public services, and sustainable project management.
• Environmental assessment and permitting to ensure legally compliant project management and infrastructure development.
• Environmental services processing, which includes the facilities that handle recycling, smelting, incineration, and more.
• Environmental consulting, which includes companies that help organizations meet local and governmental sustainability standards, or improve their visibility as an environmental steward.
Recommended: Beginner’s Guide to Sustainable Investing
6 Biggest Companies Within Environmental Services
Environmental services is a $35 billion global sector, which is projected to grow at a compound annual growth rate (CAGR) of about 6.3%, and reach some $50 billion by 2028.
Some of the biggest companies by revenue, according to CSIMarket, include:
| Company | Ticker | Market capitalization (in billions) |
|---|---|---|
| Waste Management, Inc. | WM | $87.69 |
| Republic Services, Inc. | RSG | $65.16 |
| Waste Connections, Inc. | WCN | $46.29 |
| GFL Environmental, Inc. | GFL | $17.15 |
| Clean Harbors, Inc. | CLH | $14.00 |
| Casella Waste Systems | CWST | $6.77 |
Source: CSIMarket; data from Yahoo Finance, as of Nov. 7, 2024.
Investing in Environmental Services Stocks
Several factors are contributing to the growth of the environmental services sector. These include population growth, urbanization, industrialization, increased government regulations, and rising concern among consumers and investors about environmental, social, and governmental (ESG) factors.
Growth of Waste and Pollution
According to the U.S. Environmental Protection Agency, municipal solid waste (MSW) amounts alone have increased 93% from 1980 to 2018, the last year for which data is available. MSW refers to consumer waste or garbage (e.g., everything from food waste to packaging to durable goods refuse like furniture). MSW does not include industrial or hazardous waste.
On the whole, the world population is getting richer, and with that comes more consumption and more waste creation. Many people move into cities as income increases, resulting in the need for more urban waste management.
On the plus side, technology is improving within collection, recycling, and waste processing. More waste is being converted into energy, and advanced technology systems help with processing, remediation, and more.
Benefits of Investing in Environmental Services
There are several reasons why investing in environmental services and green stocks may offer investors certain opportunities. For instance:
• Environmental services are frequently needed and demand is projected to increase.
• There is a growing body of governmental regulations in this sector that require companies to rely on a range of environmental services.
• Environmental and waste management technology (e.g., water treatment, air pollution abatement) is improving and investments are being made into new systems.
• More product packaging is now recyclable.
• As more people move to cities it is easier to collect their waste and economies of scale become relevant.
Disadvantages of Investing in Environmental Services
However, there are some downsides and things to keep in mind when considering investing in environmental services stocks and ETFs. Like stocks in any sector, it’s important to do research and consider what might happen in the future. Some things to keep in mind are:
• Consumption and waste generation are closely tied to economic cycles. If there is a recession or economic downturn, people consume less, which can affect the revenue of waste management companies.
• Inflation and currency fluctuations can affect the waste management sector as well, especially in emerging markets.
• There are efforts being made by governments, NGOs, and others to educate people and encourage them to consume and waste less. While this is great news for the environment and global health, it may not be great news for waste management companies.
• Environmental services companies are increasingly involved in energy and materials sectors, making them vulnerable to fluctuations in commodities pricing and supply chain changes.
The Takeaway
Environmental services are an essential part of hazardous and non-hazardous waste management, processing, remediation, and more. And as consumption and urbanization increase, the sector is projected to grow as well. Robust environmental services systems are crucial to sustainability efforts, and interested investors may find investment opportunities in the environmental services sector, but it’s important to weigh the risks in this field as well.
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FAQ
What are examples of environmental services?
Examples of environmental services include hazardous and non-hazardous waste collection and disposal, sewage treatment, recycling, landfill management, composting, toxic waste removal and remediation, and medical waste management. Environmental services can also include engineering and consulting for legal and regulatory compliance, and more.
What’s the meaning of environmental services?
Environmental services are companies and organizations whose aim is to help corporations and municipalities manage the constant generation of waste products and pollutants that are a natural but potentially hazardous aspect of modern life.
Why do we need environmental services?
As the world’s population grows and urban areas expand, there is a commensurate increase in environmental waste products and pollutants. Environmental services companies clean up, manage, and process waste and meet certain regulatory standards. This is essential to keep land, cities, air, and water clean and unpolluted.
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