It's becoming increasingly popular for investors to "vote their values." One way they do this is by investing in companies that make a demonstrable effort to improve the world. This is creating a category of stocks known as ESG stocks.
ESG stands for Environmental, Social, and Governance and it covers a broad range of issues. The environmental component is relatively straightforward. This analyzes and measures how companies address issues such as carbon emissions, deforestation, and green energy initiatives including sustainability efforts built into their supply chain.
The social component covers issues such as an organization's commitment to issues like the gender pay gap and diversity but also areas such as data security, sexual harassment policies, and fair labor practices. The governance component touches on areas like diversity within the corporate board of directors and executive pay.
The focus of this presentation is to give you seven companies that are giving more than just lip service to ESG initiatives. One of the criteria used in selecting the stocks in this presentation was the company's Net Impact Ratio. This is calculated from data produced by the Upright Project's Net Impact Model.
The Net Impact Model is a mathematical model of the economy that produces continuously updated estimates of the net impact of companies by means of an information integration algorithm. MarketBeat captures key insights and presents them under the "Sustainability" tab on the company's profile page.
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- Moderna
- Pfizer
- Abbott Laboratories
- Danaher
- Encompass Health
- Public Storage
- Disney
#1 - Moderna (NASDAQ:MRNA)
Moderna (NASDAQ:MRNA) may not be the first name you think of when it comes to ESG stocks. However, the company currently has a 72.6% Net Impact Ratio largely due to the impact it is having on reducing physical diseases due to its Covid-19 vaccine. While it’s difficult to say how much future vaccine revenue will be coming in the door. But, the fact that an mRNA vaccine is now in the market bodes well for other vaccines in the company’s pipeline.
MRNA stock is down 66% from its 52-week high. Some of that is due to the company’s last earnings report in November in which the company missed on both the top and bottom lines. And second, the stock is being sold off as part of the flight to risk-off assets.
Right now, Moderna stock is a hold based on the consensus opinion of analysts tracked by MarketBeat. However, the company recently received full FDA approval for its mRNA vaccine. And that is not yet being factored into the analyst ratings. Even without that approval being factored in, MRNA stock has a consensus price target of $245.21 which gives it a 49% upside.
About Moderna
Moderna, Inc, a biotechnology company, discovers, develops, and commercializes messenger RNA therapeutics and vaccines for the treatment of infectious diseases, immuno-oncology, rare diseases, autoimmune, and cardiovascular diseases in the United States, Europe, and internationally. Its respiratory vaccines include COVID-19, influenza, and respiratory syncytial virus, spikevax, and hMPV/PIV3 vaccines; latent vaccines comprise cytomegalovirus, epstein-barr virus, herpes simplex virus, varicella zoster virus, and human immunodeficiency virus vaccines; public health vaccines consists of Zika, Nipah, Mpox vaccines; and infectious diseases vaccines, such as lyme and norovirus vaccines.
Read More - Current Price
- $36.94
- Consensus Rating
- Hold
- Ratings Breakdown
- 6 Buy Ratings, 13 Hold Ratings, 3 Sell Ratings.
- Consensus Price Target
- $84.00 (127.4% Upside)
#2 - Pfizer (NYSE:PFE)
Pfizer (NYSE:PFE) has a 62.8% Net Impact Ratio as of this writing. And like Moderna, the rating largely stems from the company’s impact on reducing physical diseases. However, unlike Moderna, Pfizer has a wider spectrum of vaccines and therapeutics in the market.
That is one reason that PFE stock has not suffered the same misfortune as Moderna. However, Pfizer stock has still dropped over 13% from its 52-week high. Nevertheless, Pfizer still is considered a consensus buy with analysts. And the company received two potentially bullish pieces of news. First, Pfizer has asked the FDA to review approving its Covid-19 vaccine for children under five. Also, France announced it will begin using Pfizer’s coronavirus pill, making it the first European Union country to use the antiviral treatment.
With companies such as Pfizer, investing comes down to the company’s pipeline. In the case of Pfizer, the company has 29 programs in Phase 3 testing as of November 2, 2021. That means it’s highly likely that Pfizer will have other sources of revenue when the company’s revenue from its Covid-19 portfolio begins to level off.
About Pfizer
Pfizer Inc discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products in the United States, Europe, and internationally. The company offers medicines and vaccines in various therapeutic areas, including cardiovascular metabolic, migraine, and women's health under the Eliquis, Nurtec ODT/Vydura, Zavzpret, and the Premarin family brands; infectious diseases with unmet medical needs under the Prevnar family, Abrysvo, Nimenrix, FSME/IMMUN-TicoVac, and Trumenba brands; and COVID-19 prevention and treatment, and potential future mRNA and antiviral products under the Comirnaty and Paxlovid brands.
Read More - Current Price
- $24.95
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 7 Buy Ratings, 8 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $32.92 (32.0% Upside)
#3 - Abbott Laboratories (NYSE:ABT)
As you can see, biopharmaceutical companies are some of the leading ESG companies due to the impact they have on public health. That’s also the case with our last biotech, Abbott Laboratories (NYSE:ABT) which has a 65.9% Net Impact Ratio according to Upright. Abbott stock is back on an upswing having climbed over 10% since reporting a strong double beat in its January earnings report.
Much of Abbott’s recent success is linked to strong demand for the company’s Covid-19 tests. That’s likely to level off even if, as expected, Covid-19 reaches an endemic stage. However, the company has a proven history of beating the S&P 500 over time. And on top of its stock price performance, investors are buying shares of a Dividend King. Abbott earned entry into this exclusive club by increasing its dividend in each of the last 50 years.
About Abbott Laboratories
Abbott Laboratories, together with its subsidiaries, discovers, develops, manufactures, and sells health care products worldwide. It operates in four segments: Established Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Medical Devices. The company provides generic pharmaceuticals for the treatment of pancreatic exocrine insufficiency, irritable bowel syndrome or biliary spasm, intrahepatic cholestasis or depressive symptoms, gynecological disorder, hormone replacement therapy, dyslipidemia, hypertension, hypothyroidism, Ménière's disease and vestibular vertigo, pain, fever, inflammation, and migraine, as well as provides anti-infective clarithromycin, influenza vaccine, and products to regulate physiological rhythm of the colon.
Read More - Current Price
- $115.93
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 12 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $130.07 (12.2% Upside)
#4 - Danaher (NYSE:DHR)
Danaher (NYSE:DHR) stock is down 11.9% from its 52-week high. However, the stock has been bouncing higher since reporting positive earnings in late January. Analysts have been lowering their price targets, but DHR stock still has a consensus price target of $337.77 which would take it past its previous 52-week high.
Danaher has grown its earnings per share (EPS) by an average of 36% per year over the last three years. And the company has always made a point of prioritizing cash flow. That was evident in the company’s last earnings report. The company over $7 billion of free cash flow in 2021. That was a 30% year-over-year increase.
Of all the company’s on this list, Danaher has the lowest Net Impact Ratio score coming in at 47.4%. However, the company’s contribution to improving patient outcomes with its medical devices and diagnostic testing makes the company a solid choice for investors looking for ESG stocks to buy.
About Danaher
Danaher Corporation designs, manufactures, and markets professional, medical, industrial, and commercial products and services worldwide. The Biotechnology segments offers bioprocess technologies, consumables, and services that advance, accelerate, and integrate the development and manufacture of therapeutics; cell line and cell culture media development services; cell culture media, process liquids and buffers for manufacturing, chromatography resins, filtration technologies, aseptic fill finish; single-use hardware and consumables and services, such as the design and installation of full manufacturing suites; lab filtration, separation, and purification; lab-scale protein purification and analytical tools; reagents, membranes, and services; and healthcare filtration solutions.
Read More - Current Price
- $233.10
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 14 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $287.16 (23.2% Upside)
#5 - Encompass Health (NYSE:EHC)
Moving from the company with the lowest Net Impact Ratio we come to Encompass Health (NYSE:EHC) which has the highest Net Impact Ratio at 88.6%. The company provides facilities for rehabilitative treatment and care as well as Medicare-certified home nursing and specialized home care and in-home services through its Home Health and Hospice segment. This allows the company to score highly in the way it benefits public health as well as its positive impact on society.
With that said, the company announced plans to spin off its Home Health and Hospice Segment in the first half of 2022. In the last quarter that accounted for approximately 25% of the company’s revenue. This may provide some context for why EHC stock is down significantly from its 52-week high.
On February 1 the company posted a mixed earnings report (missed on EPS, beat on revenue). However, that may be enough to break the bearish pattern that has engulfed EHC stock. Despite some recent downgrades, analysts give the stock a consensus price target of $89.13 which is a 43% upside from its price as of this writing.
About Encompass Health
Encompass Health Corporation provides post-acute healthcare services in the United States and Puerto Rico. It owns and operates inpatient rehabilitation hospitals that provide medical, nursing, therapy, and ancillary services. The company provides specialized rehabilitative treatment on an inpatient basis to patients who have experienced physical or cognitive disabilities or injuries due to medical conditions, such as strokes, hip fractures, and various debilitating neurological conditions.
Read More - Current Price
- $98.90
- Consensus Rating
- Buy
- Ratings Breakdown
- 11 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $107.11 (8.3% Upside)
#6 - Public Storage (NYSE:PSA)
You might not expect a real estate investment trust (REIT) that specializes in self-storage, cracking a list of ESG stocks to buy. However, Public Storage (NYSE:PSA) has a 68.3% Net Impact Ratio and one of the reasons is its positive impact on society. I suppose that having a place to sequester some belongings keeps items out of landfills which could have an environmental impact as well.
But the larger story is that Public Storage operates in a defensive sector. And the demand for storage units increases in times of economic instability. This is typical because of life events such as downsizing. It doesn’t hurt that the company is the largest publicly traded self-storage REIT with ownership or interest in approximately 2,700 self-storage facilities in the United States.
That explains why PSA stock has been largely unaffected by the recent market selloff. In fact, the stock is up 11% despite the company missing on both earnings and revenue when it reported earnings in November 2021.
Another reason may be because Public Storage pays out over 95.5% of its earnings in dividends. That currently adds up to about an extra $8 per share in annual dividends to PSA shareholders.
About Public Storage
Public Storage, a member of the S&P 500 and FT Global 500, is a REIT that primarily acquires, develops, owns, and operates self-storage facilities. At December 31, 2023, we had: (i) interests in 3,044 self-storage facilities located in 40 states with approximately 218 million net rentable square feet in the United States and (ii) a 35% common equity interest in Shurgard Self Storage Limited (Euronext Brussels: SHUR), which owned 275 self-storage facilities located in seven Western European nations with approximately 15 million net rentable square feet operated under the Shurgard brand.
Read More - Current Price
- $332.86
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 8 Buy Ratings, 6 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $339.64 (2.0% Upside)
#7 - Disney (NYSE:DIS)
If you’re talking about a company that is committed to advancing many of the aims of the ESG movement, then it’s hard not to put Disney (NYSE:DIS) right near the top of the list. The company has a laundry list of corporate initiatives that cover many of the issues that ESG-minded investors care about.
With that said, Disney only has a 52.7% Net Impact Ratio. Still, growth is still the goal of ESG investing. And while DIS stock is lagging in the broader market, it is creating an opportunity to buy DIS stock at a discount. Hedge fund interest is increasing and the consensus price target of analysts has Disney making up virtually all of its 2021 losses.
To be fair, the pandemic has continued to be a drag on Disney’s theme park revenue. And the company’s most recent earnings report showed that it can only expect so much from Disney+. However, as a long-term stock to consider, the ability to generate revenues via several verticals makes the stock very appealing. And it will be even more so when it reinstates its dividend.
About Walt Disney
The Walt Disney Company operates as an entertainment company worldwide. It operates through three segments: Entertainment, Sports, and Experiences. The company produces and distributes film and television video streaming content under the ABC Television Network, Disney, Freeform, FX, Fox, National Geographic, and Star brand television channels, as well as ABC television stations and A+E television networks; and produces original content under the ABC Signature, Disney Branded Television, FX Productions, Lucasfilm, Marvel, National Geographic Studios, Pixar, Searchlight Pictures, Twentieth Century Studios, 20th Television, and Walt Disney Pictures banners.
Read More - Current Price
- $114.27
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 19 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $123.83 (8.4% Upside)
The importance of ESG investing is drawing the attention of institutional investors who are acting on the information in two ways. First, they are increasingly aligning their businesses toward a company’s ESG performance. And second, they are demonstrating a higher likelihood of retaining their investor capital with companies that make a commitment to ESG initiatives.
And if institutional investors put their money in ESG stocks, it's likely to increase their growth potential. With that said, ESG investing requires the caveat "let the buyer beware." Some companies do a better job of honoring the intent of environmental, social, and governance issues than others. And critics say that many companies use ESG metrics as a way to ensure they stay on the radar of investors.
As you would expect, when it comes to ESG stocks there are several mutual funds and ETFs that focus on this sector. Two of the most popular choices are the iShares ESG Aware MSCI USA ETF (NASDAQ:ESGU) and the Vanguard ESG U.S. Stock ETF (NYSEARCA:ESGV).
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