Bank of America analysts have named of number of out-of-consensus stock ideas, which they think score well on ESG (environmental, social and governance) factors and are set to outperform. Market participants are increasingly seeking to invest in stocks based on environmental, social and governance factors — also known as ESG or sustainable investing. U.S. sustainable funds attracted $34 billion of inflows in 2021, according to data from Morningstar , while Bank of America says that assets under management in global ESG funds are growing three times as quickly as their non-ESG peers. Yet, it is not always easy to determine which are the best sustainable investments. Bank of America has devised a "ESGMeter" — a metric that identifies companies with "superior financial stability" based on ESG attributes — in an effort to cut through the noise, analyst Xavier Le Mene explained in a note on Jan. 25. Contrarian stock picks Le Mene and colleagues screened for stocks that score highly on the ESGMeter, are liked by the bank — but not other analysts. "We identify 25 names where the ESGMeter is high, BofA analyst have a strong conviction (Buy) but where the consensus is either Neutral or Sell/Underperform," Le Mene explained. One such stock is British engineering firm Spirax- Sarco , which the bank said is the world leader in the control and efficient use of steam. This is at the core of many industrial processes and a vital component of its customers' ESG strategies, Le Mene said. Norwegian energy firm Equinor also makes the list. The company has been building a renewable portfolio focused on offshore wind and plays a leading role in the development of floating offshore wind technology, Le Mene said. It could potentially dominate this key technology of the energy transition given its cost competitiveness, he added. British self-storage firm Big Yellow — the largest self-storage company in the U.K. — is another stock favored by Bank of America. The company aims to achieve 100% of its energy needs through renewables by 2030, of which solar will contribute 50%. This should improve the company's environmental score in the coming years, Le Mene said. The bank also likes Dutch lighting company Signify , which it describes as a market leader in smart and LED lighting. The products help customers achieve energy savings — particularly pertinent given the current energy cost inflation, Le Mene said. The company's operations are also carbon neutral and use 100% renewable electricity, he added. Belgian real estate developer Warehouses De Pauw is another Bank of America favorite. Le Mene said the company plays a green leadership role in industrial real estate, with about a third of its buildings operated on locally produced green electricity. Swedish industrial giant ABB also makes the list. The company has reduced its absolute emissions by over 60% since 2015 and aims to reduce emissions across its entire supply chain and achieve carbon neutrality across its own operations by 2030, the bank said. Other contrarian stock picks by the bank include Dutch brewer Heineken , French consumer goods titan L'Oreal , Italian grid operator Terna Energy , Spanish telecommunications firm Telefonica SA , French outdoor advertising firm JCDecaux and Spanish energy producer EDP Renewables .
Pedestrians pass in front of a Bank of America branch in New York City.
Scott Mlyn | CNBC
Bank of America analysts have named of number of out-of-consensus stock ideas, which they think score well on ESG (environmental, social and governance) factors and are set to outperform.