Wall Street analysts have picked a host of new ESG-related stocks amid a surge in interest in sustainable investing. Research indicates that concern about companies' "environmental, social and governance" practices is rising among investors as pressure mounts for the world to do more to avert a looming climate emergency . "Corporates and investors face increasing pressure to contribute towards national net zero carbon emissions goals by demonstrating greater accountability to meeting climate objectives, while also disclosing the financial implications of climate change," Goldman Sachs analysts led by Emma Jones said on Oct. 15. Some progress has been made on this front. Nine in 10 S & P 500 companies have published corporate sustainability reports as of 2019, up from two in 10 in 2011, Bank of America strategist Savita Subramanian said in a note on Oct. 21. Meanwhile, a fifth of the world's 2,000 largest companies by revenue have committed to net-zero targets, Goldman said. Investors too are increasingly putting their money into ESG assets, which take environmental, social and governance criteria into account. Data from Bank of America showed that 30% of all global equity inflows have gone into ESG funds so far this year, while assets under management in global ESG funds are growing three times as quickly as their non-ESG peers. "2021 remains on track for a record year of ESG asset gathering with flows in September and YTD [year-to-date] flows still more than double what they were in 2020," Subramanian noted. This trend is expected to continue, with Goldman Sachs estimating that $6 trillion of annual investment is needed to decarbonize our future-proof our world. "The outlook for ESG investing is positive and as we are now well into the decisive decade for tackling climate change, the case for ESG investing has never been stronger," Berenberg analyst Ned Hammond and his team said in an Oct. 14 note. Goldman's picks Goldman has compiled a list of buy-rated stocks in "higher carbon exposed sectors" that are under-owned in ESG funds and have verified, science-based decarbonization targets. Picks include auto giant General Motors , chipmaker Advanced Micro Devices , industrial products manufacturer Dover Corp , French electric utility companies Electricite de France and Engie , and packaging products manufacturer Berry Global . The list also includes companies that have demonstrated "leading momentum" on improving their carbon intensity. They include U.S. energy company Devon Energy , mining giant Freeport-McMoRan , European satellite operator Eutelsat Communications and logistics provider DSV Panalpina . Morgan Stanley's stock ideas Morgan Stanley has named its top "actionable sustainability ideas" across Europe and the Americas — including four stocks with potential upside of more than 30%. All are rated overweight by the investment bank. Morgan Stanley ascribed a 76% potential upside to Joby Aviation 's share price. It likes the electric aircraft manufacturer's "distributed electric propulsion" technology, which is designed to reduce maintenance and downtime, while reducing carbon dioxide. Its lower noise output could also aid adoption, the analysts led by Mark Carlucci wrote on Oct. 15. The investment bank also likes Chilean utility company Enel Chile for its dividend yield and as "a vehicle to play the ESG theme in [Latin America] due to a rapid decarbonization process and increasingly high ESG scores." Morgan Stanley gives the company a potential upside of 50%. U.S. chemicals company Eastman Chemical is another of the bank's top picks. The company's renewable plastic technology has substantial scale potential and provides the company with first mover advantage, the analysts noted, putting its potential upside at 37%. Against the backdrop of the European Union's proposal to regulate artificial intelligence, British quality assurance provider Intertek is likely to emerge as a beneficiary, Morgan Stanley said. The company is well-placed amongst its peers and operates in an "attractive and under-penetrated" market. Berenberg's favorites Berenberg's updated basket of ESG top picks now includes U.S. water treatment company Evoqua Water Technologies , consulting firm Tetra Tech , flavor and fragrances company Givaudan , as well as insurer AXA . The ESG top picks basket comprises companies with attractive fundamentals that it judges to be "key enablers of critical environmental transformations." Credit Suisse has also released a list of ESG stock picks with high ratings, attractive valuations and strong growth prospects. The Swiss bank's top picks include CBRE , Colgate Palmolive, Robert Half , Archer Daniels Midland , NiSource, Edison International , NortonLifeLock and Molson Coors Beverage .
A wind farm shares space with corn fields in Latimer, Iowa, U.S.
Jonathan Ernst | Reuters
Wall Street analysts have picked a host of new ESG-related stocks amid a surge in interest in sustainable investing.