$47 billion swept into 'ESG' stocks last year — and here are Wall Street's favorites

Published Tue, Feb 16 20211:54 AM EST

Analysts at Wall Street's biggest banks have listed their top stocks for environmental, social and governance (ESG) factors in a sector that has soared in popularity in recent years. In the U.S. last year, investors pumped $47 billion into investment strategies that take ESG features into account, as well as financial metrics, according to Goldman Sachs . That's almost double the amount of the previous five years combined. Analysts from Credit Suisse listed several "high quality" U.S. ESG stocks that investors are currently "missing," and Morgan Stanley , meanwhile, chose top picks in oil and gas as companies face a "reckoning with climate-related risks." Wells Fargo listed food stocks it believes are ahead of tougher European ESG regulations. Goldman listed household names with high environmental and social scores in entertainment, food and beverage, financial services and tech. Here's the complete list of the investment banks' top ESG picks. Goldman's analysts warned that the definition of ESG can be unclear and the data "unchallenged." It has created its own scoring system for companies — the GS SUSTAIN framework — ranking firms based on 73 environmental and social factors such as greenhouse gas emissions, flexible working policies, waste recycling, diversity targets and the management of labor in supply chains. Based on this framework, its top U.S. stocks include firms in the consumer discretionary, IT, energy and health care industries. Top of Goldman's picks in the communications services sector is Interpublic , while auto supplier BorgWarner ranks first in consumer discretionary. Food group General Mills comes first in consumer staples and Phillips 66 is Goldman's only energy pick. Investment manager Principal Financial Group comes first in the finance sector, while health insurer Cigna is Goldman's top pick in healthcare. Manufacturing firm Rockwell Automation leads the industrials category and software business Nvidia is first in IT. Packaging firm Ball Corp is Goldman's only pick in the materials sector, while Regency Centers is the solo choice under real estate. NextEra Energy ranks first in utilities. Missing ESG picks Credit Suisse has listed the most popular U.S. stocks appearing in ESG funds, and those with the highest ESG scores are Microsoft , Amazon , chemicals company Linde and water tech firm Xylem , with ratings of 80 or above. The bank uses ESG ratings from data company Refinitiv, which takes into account more than 180 measures per sector to create an overall score. However, the bank also noted several "missing" stocks that are ESG "leaders" and that are not in the current top holdings of its ESG funds, but have high ESG scores, including seven U.S. companies. They are rated "outperform" by Credit Suisse and are "strong candidates" in ESG, per a recent note written by analysts led by Eugene Klerk. These are Target , Walmart , Lowes , PVH — owner of brands including Tommy Hilfiger and Calvin Klein — life sciences company LabCorp , heating equipment firm Trane Technologies and data center real estate investment trust Digital Realty . All seven have ESG ratings of 75 or above above, and a