Three Top Rated ESG Stocks to Watch

Historically, Wall Street has been mainly concerned with profits. However, with the 2015 Paris Climate Agreement (which President Biden rejoined on January 20th) and the growing significance of climate change, the concept of “triple bottom line” or financial, environmental, and social impact has been gaining traction. 

Many executives understand climate change comes with real financial risks.  Furthermore, the recent global protests against racism are a call to action for businesses to take action against any form of discrimination. This push to look at investment decisions more holistically has given rise to ESG (Environmental, Social, and Governance) practices and policy.

ESG measures the societal and sustainability impact of every business activity. Investors are now looking to responsibly invest in companies that manage their impact on the environment and society at large.  To serve this need of investors, ESG rating agencies measure the performance of various companies and compare them through ratings and rankings.

For our readers who want to keep their investments in sync with their values, here are a few highly rated ESG companies with stock currently in buying range.  

Microsoft (MSFT) has taken the lead in its commitment towards carbon mitigation by becoming the first company among its peers to target “carbon negative” status by 2030.  It has created a $1 billion fund to reduce emissions and start clearing carbon.  This ambitious commitment is unprecedented and sets Microsoft apart from its entire sector. Microsoft received the highest ESG rating of AAA from MSCI ESG Research in September 2019.

Of 34 analysts covering the stock, 31 rate the stock a Buy.  There are also 3 Hold ratings and no Sell ratings for MSFT stock.  With an average analyst price target of $282, MSFT seems like a good choice currently.  

Prologis (PLD) is a logistics-focused REIT with multiple “first company to…” accomplishments in the ESG space.  Prologis is the first real estate company to issue green bonds. It is also the first real estate company to be awarded the WELL certification by the International WELL Building Institute (IWBI). Additionally, Prologis is the first logistics company to receive approved SBTs or “Science-Based Targets” necessary to meet the goals outlined in the Paris Agreement of 2015.  The company ranks highly on the Corporate Knights Global 100 Most Sustainable Corporations in the World list and on the Investor’s Business Daily (IBD) 50 Best ESG Companies list.

Currently there are 14 Buy ratings for PLD stock.  There are also 3 Hold ratings and 1 Sell rating.  The average price target among the analysts covering PLD is $119.

NextEra Energy Inc (NEE) is the largest electric utility by market cap.  Over the last few decades, the company has been consistently reducing its emissions through increased renewable energy use.  Its CO2 emissions are 55% less than those of an average US utility.  NextEra has now set an ambitious goal of reducing CO2 emissions, by 2025, by 67% from its 2005 base levels.  This goal effectively means that absolute CO2 emissions would go down by 40% even while NextEra’s energy production would double during that time.  To its credit, the company last year received a best-in-class preparedness assessment by S&P Global Ratings ESG Evaluation.  NextEra has, essentially, received the highest ranking given by S&P to a company within the utility sector.

Of 21 analyst recommendations, there are 13 Buy ratings, 8 Hold ratings and no Sell ratings for NEE stock.  NEE sports a 2% dividend yield and has an average price target of $89. 

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