The U.N.-sponsored COP-21 conference taking place in Paris this month is expected to result in a binding international agreement to reduce emissions of greenhouse gases, especially carbon dioxide. All of the largest economies have already made commitments, and political momentum for an agreement has never been higher — especially given the mounting scientific evidence that the world is reaching a point of irreversible consequences if nothing changes.

#-ad_banner-#While details remain under discussion, there’s little doubt about the areas that will be impacted. The biggest carbon emitters are power plants, especially coal plants; cars; and factories, especially chemical plants. Governments are expected to accelerate the trend toward using cleaner fuels for these purposes — and over the long run, to shift considerably away from fossil fuels toward renewable fuel sources.

I wrote about the industries I expect to suffer from any agreements made at the COP-21 here. In short, the industries that will be most hurt will be coal; oil and natural gas; paper and packaging; and chemicals. As for the industries that should get a boost(renewable energy (solar and wind); power storage; equipment makers; and infrastructure), I wrote in length about those industries here.

Today, I’m presenting three specific stocks I’ve identified as potential investments, based on the agreements we expect to see come out of COP-21.

Trina Solar (NYSE: TSL) is the world’s largest solar panel manufacturer. Based in China — its shares trade as American Depository Receipts (ADRs) on the New York Stock Exchange — the company is an integrated producer of solar panels, controlling every stage of production after purchasing the polysilicon used to make panels: it produces so-called solar ingots, cuts them into ultra-thin wafers, then puts them together to form solar cells. It also puts the solar cells into modular frames that are used as panels for residential or commercial use.

While solar panels are commodity products with fiercely competitive pricing, Trina’s scale has allowed it to achieve below-average production costs other than raw materials. The company sells its panels around the world, with strong market shares in China, Asia and Europe. It is making an aggressive foray into the fast-growing Indian market, including opening up production facilities there. Revenue rose more than 20% in 2014, more than 25% in 2015 and is expected to increase about 15% in 2016. 

Trina’s balance sheet is somewhat precarious, with considerable debt and a fairly low cash cushion. But as sales increase and the company continues to lower its non-raw-material costs, we could be looking at a growing juggernaut as solar expands as a percentage of the world’s power generation portfolio over the next 10 to 20 years.

Cummins (NYSE: CMI) is one of the world’s largest engine manufacturers, with a wide range of industrial customers in the transportation, power generation and environmental sectors. It generates more than $19 billion in annual revenue selling products in 190 countries around the world. Cummins makes traditional diesel engines for trucks and equipment (including the Dodge Ram truck), but it’s also a leader in natural gas-powered engines, which are already growing in popularity as a cleaner alternative to oil — some see natural gas as a key bridge fuel for vehicles and heavy-duty equipment, such as tractors, until such engines can run on non-fossil-fuel renewables.

Cummins is also a leading producer of emissions control products — a business that should see continuing rapid growth as a result of COP-21 accords — and filtration products. Almost a third of Cummins’ sales come from emerging markets, which are expected to provide strong growth across all of its segments as they build out their economic infrastructure. Cummins is especially strong player in India, where it controls more than 40% of the heavy duty and medium duty truck-engine market.

As a leading player in both traditional oil engines and the equipment needed to transition to a renewable-fueled world, Cummins can serve as a reliable supplier to a range of vehicle and power generation companies for many years to come. The company’s balance sheet is strong, with manageable debt and hefty cash generation that allows for regular share buybacks and dividend increases. And the stock is relatively cheap, having been hit hard last week when Bank of America (NYSE: BAC) downgraded it on lower 2016 revenue projections. The stock yields 4.2% at current prices. 

Whenever a large engineering or construction project is contemplated anywhere in the world, Fluor (NYSE: FLR) is on the short list of companies considered to run it. That will stand the company in good stead as governments fund a major shift toward sustainable infrastructure, especially in power generation and the electricity grid, in the coming years.

With more than a century of experience and offices in 60 companies, Fluor is well-positioned to benefit from the billions in infrastructure spending that will result from the Paris agreement. Its expertise extends to renewable power plants, carbon-capture projects, solar-power projects, offshore wind farms — you name it. The company is a trusted contractor to public and private sector clients on every continent.

Fluor’s revenue has fallen year over year in recent quarters due to weakness in the oil and gas sector, and its stock has followed suit. But I see the decline as a buying opportunity for this long-term leader in the global engineering and construction sector, which is sure to benefit from the determined policy shift toward renewables and sustainable infrastructure. The company has a strong balance sheet and a respected management team. Don’t load up on this one, given its exposure to oil and gas, but it’s a great long-term bet.

Risks To Consider: Each of these three companies could face cyclical headwinds related to its particular business lines. Cummins and Fluor are particularly vulnerable to economic downturns in the U.S. and Asia.
    
Action To Take: Buy Trina Solar below $11, Cummins below $94 and Fluor below $48.50.

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