Goldman names its top stocks to cash in on a 'new era' of sustainable investing in Asia

Published Wed, Mar 2 20226:52 PM EST

Goldman Sachs has named a raft of stocks it says will benefit as regulation around ESG — or environmental, social and governance factors — takes on greater urgency in Asia Pacific. ESG funds had a strong 2021, according to data from Morningstar , with inflows of $71 billion compared to $51 billion the year before. While Bank of America says that assets under management in global ESG funds are growing three times as quickly as their non-ESG peers. And while Asia Pacific has long lagged Europe and the U.S. in ESG policy development, Goldman says we have entered a "new era." ESG regulation in the region is accelerating, Goldman's analysts, led by Emma Jones, said on Feb. 28, as the need for greater transparency and tightened definitions becomes apparent. ESG policies in the Asia Pacific region have doubled in the past five years and now amount to 20% of global policies, Jones added. These policies — such as reporting and disclosure requirements, carbon pricing initiatives and others — have led to improved disclosures from companies in the region, the bank said. It added that these are now in line with or exceeding disclosures in the U.S. "As the policy movement continues, we see material asset ownership implications for asset managers (both ESG and non-ESG) and companies as well as valuation implications for equities," Jones said. Conviction list Goldman noted that while companies with direct ties to positive environmental and social impacts are significantly overweight in ESG funds, there remains" potential discovery value" across numerous companies that indirectly enable a green transition. A combination of urgency to mitigate climate change, further regulation, more capital flows into ESG funds among other factors will "together result in a greater willingness of investors to broaden ownership across the Green supply chain to drive impact," Jones added. Goldman's top picks to play this theme include a number on the bank's global conviction list — the bank's top buy-rated stock picks. They include Japanese chip manufacturer Renesas Electronics , Japanese automotive components manufacturer Denso , Shin-Etsu Chemical , Taiwanese pneumatic equipment manufacturer Airtac International , electronics parts manufacturer Rohm and electric motors maker Nidec . More picks Goldman's screen of stocks also brought up a number of other names from across the Asia Pacific region: China Glass manufacturer Zhuzhou Kibing Group Waterproof products manufacturer Beijing Oriental Yuhong State-owned engine manufacturer Weichai Power Chip manufacturer Silergy Japan Automotive maker Isuzu Motors . Logistics company Yamato Holdings Conglomerate SG Holdings Hong Kong Truck manufacturer Sinotruk Hong Kong Australia Infrastructure and engineering firm Downer EDI Industrial engineering solutions firm Worley Taiwan Electronics manufacturer Delta Electronics

Brendan McDermid | Reuters

Goldman Sachs has named a raft of stocks it says will benefit as regulation around ESG — or environmental, social and governance factors — takes on greater urgency in Asia Pacific.