7 ESG Investing Ideas That Could Add to Your Wallet and to Your Soul

ESG investing - 7 ESG Investing Ideas That Could Add to Your Wallet and to Your Soul

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ESG investing considers a firm’s environmental, social and governance factors in its investment philosophy. Despite the challenges posed by the novel coronavirus, 2020 has also seen many consumers as well as investors put values-based living and investing at the center of their actions. Today, we will introduce seven ESG stocks good for your wallet and your soul.

In its most recent review of ESG investing, the Global Sustainable Investment Alliance (GSIA) reported that “Globally, sustainable investing assets in the five major markets stood at $30.7 trillion at the start of 2018, a 34% increase in two years.”

“From 2016 to 2018, the fastest growing region has been Japan, followed by Australia/New Zealand and Canada … The largest three regions — based on the value of their sustainable investing assets — were Europe, the United States and Japan.”

Put another way, ESG investing is not just a passing phase, but is here to stay and grow in the new decade. In recent years, the number of exchange-traded funds (ETFs) that focus on ESG stocks has also increased. Examples, include:

  • FlexShares STOXX Global ESG Impact Index Fund (BATS:ESGG)
  • iShares ESG Aware MSCI EAFE ETF (NASDAQ:ESGD)
  • SPDR SSGA Gender Diversity Index ETF (NYSEARCA:SHE)

Tools For ESG Investing 

Financial markets support a range of activities and trends in society. In ESG’s early days, action against global warming and poor corporate governance provided the initial impetus behind ethical investing. But as consumers and society-at-large evolves, so does ESG investing.

For instance, some investors may avoid “sin stocks” in industries such as alcohol, tobacco, gambling, or weapons. Other investors may make their political leanings parts of their portfolio decisions. In addition, other market participants may concentrate on human and animal rights as well as environmental protection issues.

Like other investment strategies, investors can either buy individual stocks or index funds that meet their criteria. For instance MSCI ESG Research provides free-of-charge ESG data and ratings. Investors can enter a company’s name on the website to see how a stock rates in terms of ESG criteria. The rating scale ranges from AAA (a “leader”) to AA, A, BBB, BB, B, and finally CCC (a “laggard”). MSCI provides a similar rating for funds as well.

There are also other providers of ESG ratings, such as the FTSE4Good Index Series. The FTSE Russell website provides a comprehensive list of indexes. Another listing of investors is the Global 100, which lists the 100 most sustainable corporations in the world.

It would be important to remember that each research provider is likely to have different methodology and criteria for listing businesses. However, if a business is at the top of one list, it generally has a high ranking on another one too.

With that information, here are seven ESG stocks to consider for sustainable investing.

  • CNH Industrial (NYSE:CNHI)
  • Edwards Lifesciences (NYSE:EW)
  • Hasbro (NASDAQ:HAS)
  • Nextera Energy (NYSE:NEE)
  • Microsoft (NASDAQ:MSFT)
  • Owens Corning (NYSE:OC)
  • Prologis (NYSE:PLD)

ESG Investing: CNH Industrial (CNHI)

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  • 52-Week range: $5.06 – $11.31
  • Year-to-date (YTD) change: Down 4%
  • Dividend yield: N/A

UK-based global capital-goods group CNH Industrial has a AAA rating in MSCI’s ESG Ratings. With a history that dates back to the mid-19th century, the firm designs, produces and sells agricultural and construction equipment, trucks, commercial vehicles, buses and specialty vehicles.

In early November, CNH Industrial released robust Q3 results with all divisions performing ahead of earlier expectations. Revenue came at $6.49 billion, up 2% year-over-year (YoY). Free cash flow was $1.0 billion.

Suzanne Heywood, chair and acting CEO, said, “CNH Industrial’s Q3 2020 results were positively impacted by a general improvement, versus the first half of 2020, in market demand across most of our businesses and countries and, in particular, in the agriculture sector in North America. Results were also supported by our continued cost containment and cash preservation actions.”

CNHI stock’s forward price-to-earnings and price-to-sales ratios are 17.36 and 0.57, respectively. We would look to buy the dips, especially if the price goes below $10.

Edwards Lifesciences (EW)

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  • 52-Week range: $51.51 – $88.00
  • YTD change: Up 9.5%
  • Dividend yield: N/A

Irvine, California-based medical manufacturer Edwards Lifesciences has a AA rating from MSCI. The group specializes in manufacturing heart valve systems used to replace or repair a patient’s defective heart valve. Edwards Lifesciences is especially known for its Transcatheter Aortic Valve Replacement (TAVR).

Its late October Q3 earnings announcement showed sales of $1.1 billion, reflecting an increase of 4% YoY. TAVR global sales increased by 6%. Adjusted EPS grew 9% to 51 cents.

The better-than-expected results came despite the challenges of the ongoing pandemic, CEO Michael A. Mussallem said. “Our observations indicate that most hospitals globally have determined that they can safely treat their aortic stenosis patients in need at the same time they care for COVID patients.”

Management also increased 2020 adjusted EPS guidance increased from $1.75$1.95 to $1.85 – $1.95. In 2021 , the company expects TAVR sales to return to double-digit growth.

EW stock’s forward P/E and P/S ratios are 39.06 and 12.31, respectively. A short-term decline toward $80 would improve the margin of safety for long-term investors.

Hasbro (HAS)

The Hasbro (HAS) logo
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  • 52-Week range: $41.33 – $109.50
  • YTD change: Down 13%
  • Dividend yield: 3%

Pawtucket, Rhode Island-based Hasbro has a AA rating from MSCI ESG. It is well-known as an entertainment, play, and toy company. InvestorPlace.com readers are likely to know a number of Hasbro’s leading brands, including Transformers, My Little Pony, Littlest Pet Shop, Play-Doh, Jenga and Monopoly. Hasbro describes its mission as to “Create the World’s Best Play & Entertainment Experiences.”

Third-quarter results In late October, the company released Q3 metrics. Revenue came at $1.78 billion. Adjusted net earnings of $258.9 million translated into diluted EPS of $1.88.

Management highlighted that the growth seen in toys, games and digital initiatives were offset by a decline in entertainment revenue. Investors were pleased to hear that global e-commerce revenues were up 50% YoY.

CEO Brian Goldner said, “Consumer demand remained strong. Global point of sale for Hasbro brands was up mid single digits, including double-digit gains in the U.S., U.K. and Australia, among others. Overall point-of-sale grew despite declines in Latin America and Asia and some stock-outs in the Games category.”

HAS stock’s forward P/E and P/S ratios are 20.83 and 2.42, respectively. Potential investors may regard any upcoming profit-taking that pushes the shares to $85 or below as good investment opportunity.

NextEra Energy (NEE)

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  • 52-Week range: $43.70 – $83.34
  • YTD change: Up 24%
  • Dividend yield: 1.9%

Juno Beach, Florida-headquartered electric and renewable energy group NextEra Energy has a AAA rating from MSCI. In Florida, it owns two electric companies, namely Florida Power & Light (FPL), and Gulf Power. The former is the largest rate-regulated electric utility in the U.S. as measured by retail electricity produced and sold.

NextEra Energy also owns a competitive clean energy business, NextEra Energy Resources, LLC, which, together with its affiliated entities, is the world’s largest generator of renewable energy from the wind and sun and a world leader in battery storage.”

On Oct. 21, it released Q3 results, with total revenue coming in at $4.79 billion. Adjusted earnings of $1.31 billion translated into $2.66 per share. A year ago, the metrics had been $1.163 billion, or $2.39 per share.

CEO Jim Robo said the 11% YoY growth in adjusted EPS reflected strong execution across all of the company’s businesses. “Both FPL and Gulf Power continue to focus on delivering an outstanding value proposition of low bills, high reliability, outstanding customer service and clean energy solutions for our customers.”

NEE stock’s forward P/E and P/S ratios are 30.12 and 8.13, respectively. Any upcoming decline in price would improve the risk/return profile for long-term investors.

Microsoft (MSFT)

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  • 52-Week range: $132.52 – $232.86
  • YTD change: Up 34%
  • Dividend yield: 1.1%

Redmond, Washington-based technology giant Microsoft has a AAA rating from MSCI. The group develops software for consumers and businesses as well as PC-related consumer technology products. It is also at the forefront of digital transformation of society and workplaces.

In late October, Microsoft released FY21 Q1 results . Revenue of $37.2 billion meant a YoY increase of 12%. Net income of $13.9 billion translated into diluted earnings per share was $1.82. Both numbers have increased 30% and 32%, respectively, from a year ago.

EVP and CRO Amy Hood said, “Demand for our cloud offerings drove a strong start to the fiscal year with our commercial cloud revenue generating $15.2 billion, up 31% year over year.”

MSFT stock’s forward P/E and P/S ratios are 31.85 and 11.07, respectively. These metrics show that the stock is not cheap. However, its business, especially cloud operations, are growing fast. Investors may consider buying the dips in one of the most loved-stock on Wall Street.

Owens Corning (OC)

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  • 52-Week range: $28.56 – $76.60
  • YTD change: Up 11%
  • Dividend yield: 1.3%

Toledo, Ohio-headquartered manufacturer of insulation, roofing, and fiberglass composite materials Owens Corning has a AA rating from MSCI. The company’s history goes back to 1935. It has around 18,000 employees in 33 countries and has been a Fortune 500 company for 66 consecutive years.

On Oct. 28, it released Q3 results. Net sales of $1.9 billion showed an increase of 1% YoY. The group reported record operating and free cash flow of $488 million and $425 million.

Net earnings came at $206 million, or $1.88 per diluted share. A year ago, the metrics had been $150 million, or $1.36 per diluted share.

CEO Brian Chambers said the Q3 performance reflected “the strength of our market positions, the depth of our product offerings, and the resiliency of our teams to execute well in challenging times.” He forecast a strong finish to 2020.

OC stock’s forward P/E and P/S ratios are 13.23 and 1.16. The company’s balance sheet is robust and operations are solid. Long-term investors may consider buying the shares.

Prologis (PLD)

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  • 52-Week range: $59.82 – $112.37
  • YTD change: Up 12%
  • Dividend yield: 2.4%

San Francisco-headquartered real estate investment trust (REIT) Prologis has a AA rating from MSCI. The group concentrates on logistics. As of Sept. 30, Prologis owned or had investments in properties “expected to total approximately 976 million square feet (91 million square meters) in 19 countries. Prologis leases modern logistics facilities to a diverse base of approximately 5,500 customers principally across two major categories: business-to-business and retail/online fulfillment.”

Several of its customers include Amazon (NASDAQ:AMZN), FedEx (NYSE:FDX), and PepsiCo (NASDAQ:PEP).

The company’s Q3 results released in October showed net earnings per diluted share came at 40 cents. A year ago, it had been 71 cents.

CEO Hamid R. Moghadam said, “Activity in our portfolio is robust and broadening — a refection of increased demand in the quarter across multiple sectors, the adoption of e-commerce and the need for higher levels of inventory.”

PLD stock’s forward P/E and P/S ratios are 59.17 and 17.50, respectively. As we approach the end of the year, the shares are richly valued. We would look to buy if there is a decline of 5%-7%.

On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Tezcan Gecgil Ph.D. has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination.


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