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5 Stocks to Rally on Rapid Investor Shift to ESG Investing
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In the past decade, companies have been focusing on environmental, social and governance (ESG) performance to increase their business value. From adoption of paperless transaction, to use of clean energy to reduction of carbon footprint, and electric vehicle adoption, businesses all over the world are playing a significant role in saving the planet. Though the environmental side is well addressed, many have neglected the social and governance aspects of the ESG parameter.
ESG has emerged as one of the most hyped trends in thematic investing in 2020 and the pandemic has boosted this trend further. While the environmental aspect was already in focus, the pandemic brought the social and governance aspects to limelight. With investors now digging deep into the company’s books for performance, data and analytics, cost, and choice, it also gives a clear picture of how businesses treat their stakeholders during the pandemic.
ESG investing allows investors to put money into companies that responded to the pandemic by focusing on long-term goals rather than looking at near-term profit.
ESG Stocks Will Continue to Outperform
ESG tends to attract attention during extreme events. For instance, heat wave in Europe, wildfires in Australia and California, flood in Malaysia and now, the coronavirus pandemic. As a bonus, this pandemic has pushed globally-listed ESG exchange-traded products like ETFs to top $100 billion for the first time, at the end of July.
As said, this pandemic has put a spotlight on important ESG issues like income inequality, diversity and inclusion, social injustice, employee welfare and climate change. While climate change has been a dominant topic in the annual shareholder meetings for all these years, the pandemic forces businesses to look at contingency planning and work environment.
These non-financial factors can impact long-term valuation of a business and show that complete application of ESG can facilitate in smooth operation, despite volatility. Per a recent Morningstar report, the number of sustainability-focused funds and their assets has doubled over the past three years. In fact, by the end of second-quarter 2020, there were 534 index fundsfocused on sustainability, accounting fora total of $250 billion. Combined inflows into both active and passive ESG-focused funds reached $71.1 billion during the second quarter. This pushes the global assets under management in ESG funds above the $1-trillion mark for the first time.
Per a Deloitte report, the percentage of investors considering ESG impacts in investment decisions increased from 48% in 2017 to 75% in 2019. Though the jump speaks quite a lot about shift in investment pattern, what grabs attention is the impact of the pandemic.
ESG investing has the ability to manage risk and create long-term value which attracts millennial and Gen Z, who are looking for long-term gains. As baby boomers prepare to transfer their wealth, the next generation can use ESG as a quality factor to improve their portfolios. According to a Cerulli Associates report, in the United States alone, Baby Boomers will pass nearly $48 trillion in assets over the next 25 years.
With a higher purchasing power, these consumers are aligning their products and services purchase decisions around social and environmental criteria. As more consumers buy ESG-positive products and services, the higher profits ESG companies will make.
Similarly, while looking for investment, these millennials and Gen Zers also emphasize on these factors. Per a State Street Global Advisors report, 87% of high net-worth millennials consider a company’s ESG track record while investing. Additionally, a MSCI report states that 90% of millennials want to increase their investment in socially-responsible products. This will eventually drive U.S.-based ESG investments between $15 trillion to $20 trillion in the coming years.
5 Top Picks
The recent trends and shift in consumer demand highlight that investors are embracing ESG investing. Hence, these five shortlisted ESG stocks that carry a Zacks Rank #1 (Strong Buy) or 2 (Buy) are poised to return well on investments.
Salesforce.com, inc. (CRM - Free Report) develops enterprise cloud computing solutions, with focus on customer relationship management.The company’s expected earnings growth rate for the current year is 25.1% compared with the Zacks Computer - Software industry’s projected earnings growth of 0.5%.
Amazon.com, Inc. (AMZN - Free Report) engages in the retail sale of consumer products and subscriptions.The company’s expected earnings growth rate for the current year is 38.7% compared with the Zacks Internet - Commerce industry’s estimated earnings growth of 0.8%. The Zacks Consensus Estimate for this Zacks Rank #1 company’s current-year earnings has moved 58.7% up over the past 60 days.
NIO Limited (NIO - Free Report) designs, manufactures and sells electric vehicles.The company’s expected earnings growth rate for the current quarter is 54.6% against the Zacks Automotive - Foreign industry’s projected earnings decline of more than 100%. The Zacks Consensus Estimate for this Zacks Rank #2 company’s current-year earnings has been raised 26.9% over the past 60 days.
Intuit Inc. (INTU - Free Report) provides financial management and compliance products and services.The company’s expected earnings growth rate for the current year is 8.5% compared with the Zacks Computer - Software industry’s projected earnings growth of 0.5%. The Zacks Consensus Estimate for this Zacks Rank #2 company’s current-year earnings has climbed 5.3% over the past 60 days.
The Procter & Gamble Company (PG - Free Report) provides branded consumer packaged goods to consumers.The company’s expected earnings growth rate for the current year is 5.5% against the Zacks Soap and Cleaning Materials industry’s projected earnings decline of 0.6%. The Zacks Consensus Estimate for this Zacks Rank #2 company’s current-year earnings has been revised 2.9% upward over the past 60 days.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.3% per year.
These 7 were selected because of their superior potential for immediate breakout.
Image: Shutterstock
5 Stocks to Rally on Rapid Investor Shift to ESG Investing
In the past decade, companies have been focusing on environmental, social and governance (ESG) performance to increase their business value. From adoption of paperless transaction, to use of clean energy to reduction of carbon footprint, and electric vehicle adoption, businesses all over the world are playing a significant role in saving the planet. Though the environmental side is well addressed, many have neglected the social and governance aspects of the ESG parameter.
ESG has emerged as one of the most hyped trends in thematic investing in 2020 and the pandemic has boosted this trend further. While the environmental aspect was already in focus, the pandemic brought the social and governance aspects to limelight. With investors now digging deep into the company’s books for performance, data and analytics, cost, and choice, it also gives a clear picture of how businesses treat their stakeholders during the pandemic.
ESG investing allows investors to put money into companies that responded to the pandemic by focusing on long-term goals rather than looking at near-term profit.
ESG Stocks Will Continue to Outperform
ESG tends to attract attention during extreme events. For instance, heat wave in Europe, wildfires in Australia and California, flood in Malaysia and now, the coronavirus pandemic. As a bonus, this pandemic has pushed globally-listed ESG exchange-traded products like ETFs to top $100 billion for the first time, at the end of July.
As said, this pandemic has put a spotlight on important ESG issues like income inequality, diversity and inclusion, social injustice, employee welfare and climate change. While climate change has been a dominant topic in the annual shareholder meetings for all these years, the pandemic forces businesses to look at contingency planning and work environment.
These non-financial factors can impact long-term valuation of a business and show that complete application of ESG can facilitate in smooth operation, despite volatility. Per a recent Morningstar report, the number of sustainability-focused funds and their assets has doubled over the past three years. In fact, by the end of second-quarter 2020, there were 534 index fundsfocused on sustainability, accounting fora total of $250 billion. Combined inflows into both active and passive ESG-focused funds reached $71.1 billion during the second quarter. This pushes the global assets under management in ESG funds above the $1-trillion mark for the first time.
Per a Deloitte report, the percentage of investors considering ESG impacts in investment decisions increased from 48% in 2017 to 75% in 2019. Though the jump speaks quite a lot about shift in investment pattern, what grabs attention is the impact of the pandemic.
ESG investing has the ability to manage risk and create long-term value which attracts millennial and Gen Z, who are looking for long-term gains. As baby boomers prepare to transfer their wealth, the next generation can use ESG as a quality factor to improve their portfolios. According to a Cerulli Associates report, in the United States alone, Baby Boomers will pass nearly $48 trillion in assets over the next 25 years.
With a higher purchasing power, these consumers are aligning their products and services purchase decisions around social and environmental criteria. As more consumers buy ESG-positive products and services, the higher profits ESG companies will make.
Similarly, while looking for investment, these millennials and Gen Zers also emphasize on these factors. Per a State Street Global Advisors report, 87% of high net-worth millennials consider a company’s ESG track record while investing. Additionally, a MSCI report states that 90% of millennials want to increase their investment in socially-responsible products. This will eventually drive U.S.-based ESG investments between $15 trillion to $20 trillion in the coming years.
5 Top Picks
The recent trends and shift in consumer demand highlight that investors are embracing ESG investing. Hence, these five shortlisted ESG stocks that carry a Zacks Rank #1 (Strong Buy) or 2 (Buy) are poised to return well on investments.
Salesforce.com, inc. (CRM - Free Report) develops enterprise cloud computing solutions, with focus on customer relationship management.The company’s expected earnings growth rate for the current year is 25.1% compared with the Zacks Computer - Software industry’s projected earnings growth of 0.5%.
The Zacks Consensus Estimate for this Zacks Rank #1 company’s current-year earnings has been revised 25.9% upward over the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Amazon.com, Inc. (AMZN - Free Report) engages in the retail sale of consumer products and subscriptions.The company’s expected earnings growth rate for the current year is 38.7% compared with the Zacks Internet - Commerce industry’s estimated earnings growth of 0.8%. The Zacks Consensus Estimate for this Zacks Rank #1 company’s current-year earnings has moved 58.7% up over the past 60 days.
NIO Limited (NIO - Free Report) designs, manufactures and sells electric vehicles.The company’s expected earnings growth rate for the current quarter is 54.6% against the Zacks Automotive - Foreign industry’s projected earnings decline of more than 100%. The Zacks Consensus Estimate for this Zacks Rank #2 company’s current-year earnings has been raised 26.9% over the past 60 days.
Intuit Inc. (INTU - Free Report) provides financial management and compliance products and services.The company’s expected earnings growth rate for the current year is 8.5% compared with the Zacks Computer - Software industry’s projected earnings growth of 0.5%. The Zacks Consensus Estimate for this Zacks Rank #2 company’s current-year earnings has climbed 5.3% over the past 60 days.
The Procter & Gamble Company (PG - Free Report) provides branded consumer packaged goods to consumers.The company’s expected earnings growth rate for the current year is 5.5% against the Zacks Soap and Cleaning Materials industry’s projected earnings decline of 0.6%. The Zacks Consensus Estimate for this Zacks Rank #2 company’s current-year earnings has been revised 2.9% upward over the past 60 days.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.3% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>