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15 Top-Rated ESG Stocks to Consider in 2021

AlphaSense

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November 30, 2020


Grid of logos against city scape.
Grid of logos against city scape.

Updated on 10/5/2021 and interested in learning more about ESG? Download AlphaSense’s latest sustainable success report, “Understanding ESG: Why It Matters and How to Prepare for the Future.” 

Historically, evaluating investments focused solely on financial returns. 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. 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 invest in companies that responsibly manage their impact on the environment and society. To serve this need of investors, ESG rating agencies measure the performance of various companies and compare them through ratings and rankings.

Learn how industry leaders like Microsoft, Prologis, and NextEra Energy consistently rank at the top of ESG rating lists below.

AS-Blog-10ESGStocks-Chart1

Sustainable and Responsible Investing has exponentially grown in the United States and will become even more relevant in a post-COVID world. Source: US SIF

1. NextEra Energy (NEE)

NextEra is the largest electric utility by market cap. Over the last few decades, the company has consistently reduced its emissions through increased renewable energy use. As a result, its CO2 emissions are 55% less than those of an average US utility. NextEra has now set an ambitious goal of reducing CO2 emissions, 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 received a best-in-class preparedness assessment by S&P Global Ratings’ ESG Evaluation last year. NextEra has, essentially, received the highest ranking given by S&P to a company within the utility sector.

Read NextEra Energy’s latest ESG Reports in AlphaSense, including:

2. NVIDIA (NVDA)

NVIDIA is well-known for making graphic cards and also for supplying chips to cryptocurrency miners. Minerals are something that NVIDIA uses extensively for its chips and cards; thus, NVIDIA is closely linked to environmental and social issues related to mining.

NVIDIA is a highly-rated ESG company because it has a stringent policy regarding conflict minerals. The company has specific due diligence procedures to ensure that it never uses conflict minerals in its products. The company is also big on the governance aspect as it trains nearly 100% of its customer/supplier/partner-facing workforce for anti-corruption and anti-bribery.

Read NVIDIA’s latest ESG Reports in AlphaSense, including:

3. Chr. Hansen (CHR.DK)

Chr. Hansen is a Danish bioscience company that operates in the human nutrition space. It specializes in producing bacteria that reduce pesticide usage, increase crop yield, and curb food wastage. From a sustainability standpoint, improving food security and reducing waste are essential milestones. Therefore, the company’s business model is inherently ESG-friendly.

The company has also developed a unique accounting system that measures the impact of its products against the UN’s Sustainable Development Goals. No wonder Chr. Hansen is the number one ranked company on the Corporate Knights Global 100 Most Sustainable Corporations in the World list.

Read Chr. Hansen’s latest ESG Reports in AlphaSense, including:

4. Microsoft (MSFT)

Microsoft has taken the lead in its commitment towards carbon mitigation by becoming the first company among its peers to target a “carbon negative” status by 2030. In addition, 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. As a result, Microsoft received the highest ESG rating of AAA from MSCI ESG Research in September 2019.

Excerpt from Microsoft’s Q1 2020 Earnings Call Transcript:  In closing, we are expanding our opportunity across all our businesses. Along with this opportunity, we recognize the responsibility we have to ensure the technology we build is always inclusive, trusted and is creating a more sustainable world. Our customers see this urgent need and are looking to us in partnership with them to take action. That’s why we announced an ambitious new sustainability commitment. Microsoft will be carbon negative by 2030. And by 2050, we will remove all the carbon we have emitted since the company was founded in 1975. And our $1 billion Climate Innovation Fund will accelerate the development of carbon reduction and removal technologies. In addition, we will continue to innovate alongside customers with profitable, sustainable solutions that expand our opportunities.

Read Microsoft’s latest ESG Reports in AlphaSense, including:

5. Home Depot (HD)

As the largest home improvement retailer in the US, Home Depot deals with multiple wood-based products. However, the company has a strict sourcing policy that prevents the purchase of conflict minerals and exploits the natural resources of developing countries. Home Depot also plans to reduce its emissions by 40% by 2030 and 50% by 2035. Another big goal is to help Home Depot consumers reduce their water consumption by 250 billion gallons. There are seven focus areas on which the company is working to become a sustainable and responsible enterprise.

Read Home Depot’s latest ESG Reports in AlphaSense, including:

Home Depot Business Code of Conduct and Ethics

6. Prologis (PLD)

Prologis 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 the Investor’s Business Daily (IBD) 50 Best ESG Companies list.

Read Prologis’s latest ESG Reports in AlphaSense, including:

7. Emcor Group (EME)

Emcor is a construction and infrastructure company. It is a highly-rated ESG company because it pursues all the components, namely the E, the S, and the G. The company implements its green energy solutions in multiple areas of its operations. In addition, the company is engaged in eliminating the gender pay gap and removing exploitation from its global supply chain on the social aspect. On the governance front, the company has given unprecedented encouragement to its employees to flag any ethics breaches. As a result, Emcor stands out as an excellent all-around ESG-compliant business.

Read Emcor’s latest ESG Reports in AlphaSense, including:

8. West Pharmaceutical Services (WST)

Rated as one West Pharmaceutical Services is a Pennsylvania-based medical supplies company that operates as a critical supplier to the pharmaceutical, biotechnology, and generic drug industries. West develops, manufactures, and distributes elastomer-based supplies for the containment and administration of injectable drugs, including essential equipment such as syringes, stoppers, and plungers, along with somewhat more complicated devices, including auto-injectors and other self-injection platforms. Their commitment to ESG is primarily focused on Compliance and Ethics; Diversity and Talent; Health and Safety; Philanthropy; Environmental Sustainability, and Quality.

Read West Pharmaceutical Services’ latest ESG Reports in AlphaSense, including:

9. Salesforce (CRM)

Salesforce has some important goal-based ESG initiatives in place–it has committed 1 million employee hours to the UN’s Sustainable Development Goals. Salesforce has also joined the UN Global Compact, a platform for companies to align with responsible business practices. Plus, the company recently launched Salesforce Sustainability Cloud, a system that helps businesses track, analyze, and report vital environmental information.

These actions can ultimately help in the overall reduction of carbon emissions. In early 2020, the company launched 1t.org, an initiative to connect, empower, and mobilize the global restoration of 100 million trees.

Read Salesforces’ latest ESG Reports in AlphaSense, including:

10. GlaxoSmithKline (GSK)

This UK-based pharmaceutical giant has some giant ESG initiatives. It has made a total of 13 commitments that contribute to various UN Sustainable Development Goals. The company aims to reduce its environmental impact by 25% by 2030.

On the social front, the company aims to reach 800 million underserved people by 2025. In addition, GSK is working towards more excellent female representation in senior roles and LGBT advancement on the governance front. All of the company’s goals and the progress towards those goals are published in an annual summary report.

Read GlaxoSmithKline’s latest ESG Reports in AlphaSense, including:

11. Republic Services (RSG)

Republic Services, an American waste disposal company whose services include non-hazardous solid waste collection, waste transfer, and waste disposal, recycling, and energy services, has taken ESG very seriously. The process 6 million tons of recycling each year at their 91 recycling centers. Beyond that, their recycling investments transform recyclable materials into an environmental supply chain, using practical innovations to create renewable energy, reduce emissions, and lower our operating costs.

By 2030 they hope to positively impact 20 million people, reduce absolute Scope 1 and 2 greenhouse gas emissions by 35%, and increase recovery and circularity of critical materials by 40%.

Read Republic Service’s latest ESG Reports in AlphaSense, including:

12. Flower Foods (FLO)

Flowers Foods, a producer and marketer of packed bakery food, has committed to applying sustainability principles to all aspects of its business. As a result, they’ve made significant progress towards their 2025 goals, including investing in energy-efficient upgrades, reducing waste sent to landfills, and expanding their commitment to responsible sourcing practices.

More specifically, they are committed to moving towards 100% recyclable/ reusable packaging, reducing water usage per metric ton by 20%, achieving zero waste to landfill, and sourcing 100% RSPO-certified palm oil for all cake products achieving RSPO Supply Chain Certification.

Read Flower Foods’ latest ESG Reports in AlphaSense, including:

13. Danaher (DHR)

Danaher Corporation designs, manufacture, and markets professional, medical, industrial, and commercial products and services. They have established three clear goals to ensure their commitment translates into meaningful action. First, by 2024, they pledged a 15% reduction in energy use, a 15% reduction in Scope 1 and 2 greenhouse gas emissions, and a 15% decrease in the percentage of non-hazardous/non-regulated waste sent to landfills and incinerators, compared to their 2019 levels. 
They have enhanced their DBS toolkit with energy management and waste reduction resources. Beyond a commitment to the environment, they have also set up several employee-focused programs to improve their workplace experiences, including Associate Relief Fund, Danaher Scholarship Program, and Danaher Go.

Read Danaher’s latest ESG Reports in AlphaSense, including:

14. Honeywell (HON)

Honeywell International Inc. is an American publicly traded, multinational conglomerate corporation, working primarily in aerospace, building technologies, performance materials and technologies, and safety and productivity solutions. Honeywell claims to “sustainability in action” across their primary areas of focus.

In 2021, Honeywell once again earned recognition as one of the World’s Most Ethical Companies by Ethisphere, a global corporate ethics and compliance leader. Honeywell has received this award a total of six times. 

Read Honeywell’s latest ESG Reports in AlphaSense, including:

15. PayPal (PYPL)

An American multinational financial technology company, PayPal, donated nearly $17 billion to nonprofits and causes with their Giving Platform. In 2020, they were featured in a Harvard Business School case study on marrying purpose and profit.

For 2021, they updated a number of their ESG initiatives from 2019, including streamlining of specific topics to reflect critical issues better (i.e., water and waste management consolidated under natural resource management) and emerging trends and opportunities regarding climate change, product innovation, human rights, and supply chain management.

Read PayPal’s latest ESG Reports in AlphaSense, including:

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