1 in 4 investing dollars are now going into ESG strategies. How to play it, according to Cowen

Published Thu, Mar 18 202111:17 AM EDT

Investors poured record amounts of money into environmental, social and governance-based funds in 2020 as the pandemic, climate disasters and racial injustice came into sharp focus. That momentum will grow in 2021 and beyond, according to Cowen. The firm noted that roughly one in four dollars in the U.S. is now invested through an ESG lens. If two equities offer similar expected risks and returns, investors are increasingly likely to choose the name that screens better on sustainable investing scores. Indeed, sustainable funds attracted a record $51.1 billion in inflows in 2020, according to data from Morningstar. That figure more than doubled 2019's prior record. With this momentum in mind, Cowen put together a list of its top ESG investment ideas for 2021. The list comprises outperform-rated stocks that have upside catalysts on the horizon. Each name also scores highly on the firm's proprietary ESG rating methodology. The firm partnered with Truvalue Labs to establish its sustainable-investing framework, which it now applies to the majority of its coverage universe. Scores are on a 0 to 100 scale, with 50 representing a neutral impact. Any score above or below the halfway mark indicates a more positive or negative impact. ChargePoint , which makes charging infrastructure for electric vehicles, is one of the names on the list. The firm initiated coverage on the stock with an outperform rating earlier in March , noting its best-in-class hardware and software offerings. The company, which went this year via a special purpose acquisition company, currently has between 60% and 70% market share in North America. Cowen predicts the company's footprint in Europe will grow to as much as 30% from less than 5% today. Cowen gives ChargePoint an ESG score of 66. With the latest stimulus package now in the rearview mirror, President Joe Biden is expected to turn to infrastructure. New funding initiatives could act as an upside catalyst for ChargePoint, the firm said. Within the electric vehicle space, Cowen also pointed to Cree as a name for investors to buy. The North Carolina-based company makes semiconductors, among other things, for electric vehicles. "We see CREE outperforming peers on [total addressable