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.