Morgan Stanley says 'impact' investing is about to boom — and screens for stocks to cash in

Published Tue, Nov 30 20218:09 PM ESTUpdated Tue, Nov 30 202110:52 PM EST

Morgan Stanley has named a slew of stocks that are well placed for a boom in impact investing, as investors look for positive social and environmental outcomes — not just profit. Impact investing — defined by Morningstar as a strategy that seeks to have a measurable impact on specific issues alongside financial returns — is set to be the fastest growing sustainability strategy over the next 5 years, Morgan Stanley strategists, led by Jessica Alsford, said on Nov. 25. "Intentionality, measurability and financial returns differentiate impact investing from other sustainable investing strategies," she wrote in a note for clients. Impact investing has a "strong growth trajectory" ahead, she added, with assets under management expected to rise from $123 billion in 2020 to almost $700 billion in 2025 in public markets. Stock picks Given this strong growth forecast, the analysts screened for "impact ideas" and devised a list of 165 stocks, with more than half from the healthcare sector. The stocks all have 100% revenue exposure to one of the bank's key sustainability themes, are rated overweight by its analysts and have at least 10% upside to the analysts' price target. Within the health-care sector, stocks that made the bank's list include Abbott , Alibaba Health , Boston Scientific , Novartis , Alnylam Pharmaceuticals , Teleflex and Amerisource Bergen . San Francisco-based Alector , a commercial-stage biotech company working on immuno-neurology treatments, has the highest upside to the bank's price target at 166%, according to Morgan Stanley. Information technology stocks on the screen include MasterCard , Visa , PayPal , Zoom and Xiaomi . E-signature firm DocuSign , cybersecurity specialist SailPoint Technologies , Indian consultant Tata Consultancy and cyber risk management company Tenable also make the list. Brazilian payments provider PagSeguro Digital has the highest potential upside to the bank's price target at 109%, the analysts said. Communication services stocks include Chinese tech titan Tencent , Thai mobile phone operator Advanced Info Service , China Mobile , Hong Kong telecommunications conglomerate PCCW and Singapore-based Starhub . The analysts said the Chinese state-owned telecommunications operator China Unicom has the highest upside to their price target at 75%. Other stocks that make the list include Hong Kong-listed insurer AIA , British packaging company Amcor , Chinese battery manufacturer Ganfeng Lithium , Chinese food delivery behemoth Meituan , U.S. insurer MetLife and online travel firm Trip.com . Article 9 funds The analysts also studied the holdings of Article 9 funds — which have environmental or social goals as their objective — to identify the most commonly held stocks. They noted that these funds tend to be overweight industrials, healthcare, real estate and utilities, and significantly underweight the energy sector versus the benchmark of MSCI AC World All Cap Index. The top five stocks held by the 40 largest Article 9 Funds include chipmaker ASML , French electrical equipment group Schneider Electric , Danish wind turbines manufacturer Vestas , scientific equipment maker Thermo Fisher Scientific and Belgian materials technology group Umicore , Morgan Stanley said.

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Benoit Tessier | Reuters

Morgan Stanley has named a slew of stocks that are well placed for a boom in impact investing, as investors look for positive social and environmental outcomes — not just profit.