These are the best ESG stocks to own, according to Cowen

Published Thu, Mar 5 20203:09 PM EST

(This story is for CNBC PRO subscribers only.) As the sustainable investing movement gains traction and investors hunt for stocks that score well on ESG metrics, Cowen scanned its coverage universe and identified 50 companies that have upside ahead, both from an ESG as well as a financial standpoint. The oft-used "ESG" acronym denotes a strategy whereby a company's environmental, social and governance factors are evaluated alongside traditional financial metrics. Cowen said that applying this framework offers a "differentiated and alpha-additive complement to fundamental investment analysis." The firm's list includes names like Chipotle and Aptiv. "In addition to an attractive fundamental stock analysis, the stocks included in this report reflect companies that have demonstrated a commendable effort to incorporate ESG principles into their core strategy and business model and have outlined goals and initiatives to further enhance their ESG performance," the report said. Here are some of the names on the list: Chipotle The firm has an outperform rating on shares of Chipotle , and a $1,000 price target, which is 36% above where the stock currently trades. "We like Chipotle's commitment to 'food with integrity', or responsibly raised meats and produce, which we couple with growing consumer demand for knowing 'what's in my food' ... We believe Chipotle strikes the right balance with ESG-related investments, as they have typically also served to bolster unit economics and shareholder returns." Aptiv The firm has an outperform rating on Aptiv and a $109 target on the stock, which is 36% above where it currently trades. "Aptiv is our top idea in auto tech, and we believe the company's portfolio features unique capabilities in hardware, software, and computing that are key to next gen vehicle platforms ... Aptiv's strong performance in the ESG theme largely reflects the company's contributions toward the mobility industry's transition towards vehicle electrification, which tackles the "E", environmental, aspect of ESG." Itron Cowen has an outperform rating on Itron and a $90 target, which is 21% above where the stock currently trades. "Itron's portfolio of smart networks, software, services, and sensors helps utilities better manage electricity, gas, and water resources, which contributes to the company's strong presence in the ESG theme ... The announcement of new contract awards as well as additional restructuring/cost cutting efforts could serve as a catalyst for the stock." Stryker The firm has an outperform rating on shares of Stryker . Cowen's $240 target is 27% above where the stock currently trades. "Stryker's corporate responsibility initiatives are centered around promoting global health, resource efficiency and improving safety ... SYK enters 2020 coming off a strong 2019 performance that saw the company maintain its run of delivering top-tier organic revenue growth vs the MedTech peer group. We expect this streak will continue throughout 2020 and beyond." PepsiCo Cowen has an outperform rating on shares of PepsiCo . The firm's $164 target is 19% above where the stock currently trades. "PEP has been a standout in our coverage in its commitment to ESG initiatives which began in earnest in 2007 with the launch of its 'Performance with Purpose' program...We continue to be encouraged by PEP's ESG accomplishments and outlook while still positioning itself for improving operating leverage trends, where we model for consistent 4% top-line growth and 5-7% operating income growth in the near to medium term." Nucor Corp. Cowen has an outperform rating on Nucor Corp , and the firm's $60 target represents 46% upside ahead. "NUE is the largest recycler and producer of steel in the United States. The company's steel mill operations, which utilize EAF steelmaking technology, convert recycled ferrous scrap into a wide range of finished steel products servicing a diverse set of industrial end markets." - CNBC's Michael Bloom contributed reporting.

Morgan Stanley recently said that ESG will be the defining acronym of the next decade, likely to dominate financial markets during the 2020s.

Alicia Llop | Getty Images

(This story is for CNBC PRO subscribers only.)

As the sustainable investing movement gains traction and investors hunt for stocks that score well on ESG metrics, Cowen scanned its coverage universe and identified 50 companies that have upside ahead, both from an ESG as well as a financial standpoint.

The oft-used "ESG" acronym denotes a strategy whereby a company's environmental, social and governance factors are evaluated alongside traditional financial metrics.

Cowen said that applying this framework offers a "differentiated and alpha-additive complement to fundamental investment analysis." The firm's list includes names like Chipotle and Aptiv.

"In addition to an attractive fundamental stock analysis, the stocks included in this report reflect companies that have demonstrated a commendable effort to incorporate ESG principles into their core strategy and business model and have outlined goals and initiatives to further enhance their ESG performance," the report said.