We have seen that Corporate Social Responsibility (CSR) has been morphed into Environmental, Social and Governance (ESG) for many companies. This is because ESG policies and practices have provided positive outcomes for companies, especially in terms of financial performance and long-term business strategy. Cherry on the cake, it also attracts and retains diverse talent for the companies.
ESG Stocks Stand Out During COVID-19 Slump
Companies with ESG policies not only provide a financial return but also drive valuable social and environmental change. Such companies focus primarily on climate change, renewable energy, healthcare, working conditions and community development.
The COVID-19 pandemic has shown us how health and environmental issues can become a profound social problem and cause material governance challenges. Investors and consumers have now become much more vocal about companies failing to take their social role seriously.
Companies that have integrated ESG policies have passed the COVID-19 stress test with flying colors. These businesses have scored well on various ESG metrics and have outperformed major averages during the virus slump. Per EPFR research, ESG funds have brought in $61.6 billion in new money so far this year.
Millennial’s Role in ESG Revolution
Millennials and Generation Z are making up an increasing percentage of the workforce and ESG issues only help in attracting and retaining the diverse talent. Coming to investment, millennials are at a pivotal point as this generation is on the threshold of their careers and at the peak of their saving age. Their investment ideology goes beyond money-making and involves ideas to build a better world.
Millennials want to invest in companies that resonate well with their values along with portfolio diversification and long-term performance. In 2018, 57% of millennial investors divested or turned down an investment opportunity because the company harmed consumers’ health and well-being.
This 23 to 38 age group accounts for one-third of the global population and are also undergoing trillions of dollar wealth transfer from their baby boomers generation. These funds along with millennials’ own savings potential drive them toward sustainable investing. Per a global survey by deVere Group, 77% of millennial investors keep ESG issues as top priority while assessing investment opportunities.
Millennials have just begun gaining attention in the investment space. As this generation continues to move toward the peak of their savings potential, their influence will keep growing.
Per a new proposed plan by the Trump administration, fiduciaries of pension and 401(k) plans could be forced to select investment based on economic criteria only. But, ESG assets still find plenty of economic reasons to attract investors. In fact, a BlackRock study shows that even after the coronavirus-led crash, 94% of the sustainable stocks outperformed traditional stocks in the first quarter.
5 Stocks to Buy
Millennials are reshaping the investment landscape and sustainable investing has taken center stage. This generation investors' preferences revolve around the companies' sustainability. The coronavirus pandemic has underlined the strength of ESG-focused companies during downturns. Given the current scenario and enormous prospects, we have shortlisted five winning ESG stocks.
ResMed Inc RMD develops, manufactures, distributes, and markets medical devices and cloud-based software solutions. The company is committed to upholding local and international laws, which support environmental sustainability. It also focuses on minimizing use of natural resources, developing products with reduced impact on the environment throughout their lifecycle and expects suppliers to comply with applicable environmental regulations in their respective country.
The company’s expected earnings growth rate for the current year is 23.4% compared with the Zacks Medical - Products industry’s estimated earnings growth of 3.2%. The Zacks Consensus Estimate for its current-year earnings has climbed 5.9% over the past 90 days. ResMed sports a Zacks Rank #1 (Strong Buy). You can seethe complete list of today’s Zacks #1 Rank stocks here.
West Pharmaceutical Services, Inc. WST manufactures and sells containment and delivery systems for injectable drugs and healthcare products. The company focuses on reduction of greenhouse gas emissions, waste, energy and water usage, and increased recycling.
The company’s expected earnings growth rate for the current year is 11.4% against the Zacks Medical - Dental Supplies industry’s estimated earnings decline of 11.5%. The Zacks Consensus Estimate for its current-year earnings has risen 3.7% over the past 90 days. West Pharmaceutical Services sports a Zacks Rank #1.
NextEra Energy, Inc. NEE generates, transmits, distributes, and sells electric power to retail and wholesale customers. The company focuses on innovative clean energy and has a goal to reduce its carbon dioxide (CO2) emissions rate by 67% by 2025, from the 2005 baseline.
The company’s expected earnings growth rate for the current year is 8.5% against the Zacks Utility - Electric Power industry’s estimated earnings decline of 0.4%. The Zacks Consensus Estimate for its current-year earnings has climbed 0.2% over the past 60 days. NextEra Energy carries a Zacks Rank #2 (Buy).
McCormick & Company, Incorporated MKC manufactures, markets, and distributes spices, seasoning mixes, condiments, and other flavorful products. The company plans to use 90% of products with improved transparency (non-GMO, BPA-free, organic). It also aims to have 80% of employees participating in voluntary health and well-being programs globally by 2025.
The company’s expected earnings growth rate for the current year is 6.4% compared with the Zacks Food - Miscellaneous industry’s estimated earnings growth of 0.2%. The Zacks Consensus Estimate for its current-year earnings has climbed 9.4% over the past 60 days. McCormick & Company carries a Zacks Rank #2.
The Procter & Gamble Company PG provides branded beauty, grooming, health care, fabric & home care, and baby, feminine and family care consumer packaged goods. The company’s new sustainability goals called Ambition 2030 aims to enable and inspire positive impact on our environment and society while creating value for employees and consumers.
The company’s expected earnings growth rate for the current year is 9.7% against the Zacks Soap and Cleaning Materials industry’s estimated earnings decline of 2.8%. The Zacks Consensus Estimate for its current-year earnings has climbed 0.2% over the past 60 days. Procter & Gamble carries a Zacks Rank #2.
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