5 ESG Stocks To Buy As Climate Risk Takes Center Stage
Zacks Investment Research | Jan 14, 2020 08:37PM ET
Rapid climatic change and increasing environmental disasters have grabbed investors’ attention making them more interested in climate change-related investments. And why not? The recent Australian bushfires have taken 25 lives, and thousands of animals have perished with more than 12 million acres burned to dust. Smokes have reached as far as South America and health issues are bothering the entire continent.
Last year, similar destructive fires ravaged the Amazon (NASDAQ:AMZN) and this year Indonesia's devastating floods killed more than 60 people and destroyed properties. These extreme weather events are pressing concerns for not only climate activists but are also a “wake-up call” for industrialists and investors.
The president of the Federal Reserve Bank of San Francisco acknowledged the climate change risks and commented that “higher sea levels, heavier rainfalls, dryer conditions, and the associated fallout can cause catastrophic losses to property and casualty insurers.”
Climate Change & Investment Connection
According to an investor survey conducted by Bank of America (NYSE:BAC) Securities, millennial investors are most interested in impact investing, with nearly 90% making it their first choice. And impact investing is based on the environmental, social and governance (ESG) criteria.
Additionally, the world’s largest asset manager, BlackRock (NYSE:BLK), has become the latest signatory to Climate Action 100+, which is an influential big-money pact that urges companies ranging from fossil-fuel producers to consumer-product conglomerates to become carbon-neutral by 2050. Though this initiative is at its adolescence, greenhouse-gas emitters are taking actions to make a significant reversal of this man-made climate change.
Banks are creating pressure on companies having a high carbon footprint. For example, Goldman Sachs (NYSE:GS) is tightening its lending on certain fossil fuel projects that include Arctic drilling. Further, the banking giant has pledged to invest $750 billion through 2030 in fighting climate change.
Why ESG Stocks?
This year, climate change will play a crucial role in investment decisions driven by responsible investing. Now, responsible investing is the integration of environmental, social and governance (ESG) factors into investment processes and decision-making.
Notably, ESG investment has carved a niche in stock markets globally. But in the coming decade, it is expected to become a much broader and more critical investment strategy, with millennials being the prime drivers. In fact, Bank of America estimates that there will be investments in more than $20 trillion of asset growth in ESG funds in the next two decades.
Moreover, the track record of ESG and clean energy funds has provided a positive report to gain investors’ confidence. iShares Global Clean Energy ETF (NYSE:XLE) (ICLN) and First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) soared nearly 39% and 44.8%, respectively, last year and surpassed the S&P 500 Index and the Nasdaq Composite. Additionally, iShares ESG MSCI USA Leaders ETF (SUSL) has accrued $1.85 billion and risen 17% since its launch in May 2019.
What’s more, M&A deals also highlight this space along with increased focus on climate change risk assessment. In October 2019, MSCI Inc.’s subsidiary MSCI Barra (Suisse) Sàrl completed the acquisition of Zurich-based environmental fintech and data analytics firm. The firm specializes in climate change scenario analysis.
5 Stocks to Buy
Recent environmental disasters have encouraged investors to opt for ESG stocks. Hence, these five shortlisted stocks that carry a Zacks Rank #1 (Strong Buy) or 2 (Buy) are poised to return well on investments.
Applied Materials, Inc. (NASDAQ:AMAT) provides manufacturing equipment, services and software to the semiconductor, display and related industries.
The company has a very active program called design for environment and is modifying materials at atomic levels and on an industrial scale that applies to both glass substrates and silicon wafers used in semiconductors.
The company’s expected earnings growth rate for the current year is 24% against the Zacks Zacks Investment Research
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.