ESG investing denotes investment in companies that includes an analysis of their environmental, social, and governance records and initiatives. These largely non-financial factors are becoming increasingly key for investors in their analysis of the growth prospects and risk metrics of stocks. Investors now pick companies based on their potential return on investment, sustainability, and long-term impact on the environment. This is because companies with high ESG investing scores are believed to have lower exposure to the risk of economic loss arising from many issues in the ESG domain.
ESG, or Socially Responsible Investing (SRI), can involve the evaluation of a company on many aspects, including employee well-being, social unrest, climate control, compliance with corporate governance, among others. ESG investing has gained prominence in recent years. According to research firm Opimas, ESG Investing has tripled over eight years to account for $40.5 trillion in 2020. With increased awareness, the momentum surrounding ESG investment is likely to continue.
We believe Microsoft Corporation (MSFT), Intel Corporation (INTC), Adobe Inc. (ADBE), and UnitedHealth Group Incorporated (UNH) are among the best picks now with regard to ESG Investing. These three large-cap companies are also held by the Vanguard ESG U.S. Stock ETF (ESGV), which has returned more than 73.9% over the past year.
Microsoft Corporation (MSFT)
According to Sustainalytics Inc., MSFT has a low ESG risk rating of 14.7. The company has also rated INTC’s management of ESG Material Risk as Strong. MSFT has been carbon neutral worldwide since 2012 and aims to be carbon negative by 2030. The company’s cloud and artificial intelligence (AI) services help businesses reduce their energy consumption, cut their physical footprints, and develop sustainable products themselves.
The company is one of the largest purchasers of renewable energy and its Puget Sound campus has been zero-waste certified since 2016. MSFT is also investing $50 million in its AI for Earth program to boost innovation by empowering those addressing sustainability challenges by the power of AI.
MSFT ended yesterday’s trading session at $230.72, rallying 64.33% over the past year. During the past six months, the stock has gained 15%.
It’s no surprise that MSFT has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
MSFT has a Sentiment rating of A along with Stability and Quality ratings of B. In the D-rated Software – Application industry, it is ranked #14.
In addition to the POWR Ratings grades I’ve just highlighted, you can see the MSFT ratings for Growth, Momentum, and Value.
Intel Corporation (INTC)
In 2018, Morgan Stanley referred to INTC as one of the first mover companies that is “already capitalizing on investor interest in ESG.” According to Sustainalytics Inc., INTC has a low ESG risk rating of 16.9. The company has also rated INTC’s management of ESG Material Risk as Strong.
Last May 2020, INTC launched its 2030 strategy and goals, which demand continued progress in corporate responsibility for the next decade. This includes achieving net positive water use, doubling the number of women and underrepresented minorities in senior leadership roles, 100% green power and zero waste to landfills across INTC’s global manufacturing operations, and scaling the impact of its supply chain human rights programs.
INTC ended yesterday’s trading session at $63.73, rallying 33.9% over the past year. During the past six months, INTC has gained27.7% higher.
INTC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our POWR Ratings system. INTC has a Value and Quality grade of A and a Momentum and Sentiment grade of B. In the B-rated, 99-stock Semiconductor & Wireless Chip industry, it is ranked #13.
To see additional POWR Ratings for Growth and Stability for INTC, Click here.
Adobe Inc. (ADBE)
According to Sustainalytics Inc., ADBE has a low ESG risk rating of 10.9. The company has also rated ADBE’s management of ESG Material Risk as Strong.
ADBE has long adhered to ESG parameters in its operations. The company’s Vice President of investor relations, Jonathan Vaas, stated, “We are a leader in our industry on ESG metrics and performance, and we see a positive correlation with our market cap and investor interest.”
Transitioning to remote working, gender inclusivity, and social inequality, as well as implementing COVID-19 protocols, are some of the major ESG-related areas in which ADBE has been engaged since 2020. In its ESG report for ADBE, MSCI stated, “The company has implemented some of the industry’s best practices to protect its clients’ data.”
ADBE ended yesterday’s trading session at $439.18, rising 49% over the past year. During the past six months, the stock has declined 6%.
Due to its bright prospects, ADBE has an overall B rating, which equates to Buy in our POWR Ratings system. ADBE has a Quality rating of A and Sentiment and Stability ratings of B. In the 114-stock Software – Application industry, it is ranked #21.
Click here to see the additional POWR Ratings for ADBE (Growth, Value, and Momentum).
UnitedHealth Group Incorporated (UNH)
UNH is a diversified health care service provider in the U.S. UnitedHealthcare, OptumHealth, OptumInsight, and OptumRx are the four segments through which it operates. According to Sustainalytics Inc., UNH has a medium ESG risk rating of 21.3. The company has also rated UNH’s management of ESG Material Risk as Average.
In its Sustainability report for 2019,UNH highlighted its long-standing commitment to sustainability and enumerated its ESG efforts. The company wants next-generation health system to be developed in a way that increases access to care, makes care more affordable, enhances the care experience, and improves health outcomes. UNH has achieved 3.87% carbon reduction year-over-year by incorporating energy efficiency and high-performance design in construction practices. The company has also recycled 7,964 metric tonnes of waste.
UNH ended yesterday’s trading session at $362.05, surging 66.8% over the past year. During the past six months, the stock has climbed 17.5%.
Due to its bright prospects, UNH has an overall B rating, which translates to a Buy. UNH has a grade of A for Stability, and B for Value, Quality, and Sentiment. In the B-rated, 10-stock Medical – Health Insurance industry, it is ranked #2.
Click here to see the additional POWR Ratings for UNH (Stability, Growth, and Value).
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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MSFT shares were trading at $231.25 per share on Friday afternoon, up $0.53 (+0.23%). Year-to-date, MSFT has gained 4.21%, versus a 4.41% rise in the benchmark S&P 500 index during the same period.
About the Author: Namrata Sen Chanda
Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education. More...
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