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GOLDMAN SACHS: Buy these 14 'overlooked' winners to beat the investor rush for the best green stocks

Goldman Sachs NYSERamin Talaie/Corbis/Getty Images

Summary List Placement

The coronavirus crisis has encouraged a wave of investment in companies that meet tough environmental, social and governance-related criteria (ESG), as investors increasingly demand greater commitment by the corporate world to more sustainable, climate-friendly business practices.

ESG stocks have been some of the biggest winners over the last 12 months and now investors are looking beyond some of the big-name favorites for other companies that will deliver big upside, as they join the seemingly unstoppable trend.

Despite a recent pullback in the broader stock market, hot-ticket ESG names are trading at a hefty premium to the rest of the market, and Goldman Sachs has unearthed some lesser-known gems that look set to yield juicy returns, as capital continues to flow into the green asset class.

"After a record year of ESG equity fund flows in 2020 (+$271 billion), inflow momentum has continued into 2021 (+$99 billion through February)," a team led by Derek Bingham wrote in a note earlier in the week.

The influence of ESG owners has also increased. On average, ESG ownership as a percentage of the total amount of company shares available to own - the float - increased 5% from August 2020 to February this year, to an average of 13% for the names in Goldman Sachs' ESG fund universe, the bank said. 

However, a misconception of this statistic is that the rally has been caused solely by increased investment in exchange-traded funds. These passive vehicles make up a larger share of ESG flows, but actively managed flows have also had a significant impact, the note said.

Goldman said active fund flows in the final quarter of 2020 were more than double all fund flows in 2019 for that category.

Active GS ESG Flows

Fund flows don't look to be slowing down, but the are only a certain number of top-quality ESG stocks out there - hence the premiums they command. Therefore, Goldman have compiled this list of companies that are underowned by ESG funds and that appear currently overlooked:

Guangdong South NMTradingView

Ticker: SHE: 300770

Market cap: $1.9 billion

Sector: Media

Recommendation: Buy


Strong employee management, incentives and retention.

Archer-Daniels-MidlandMarkets Insider

Ticker: NYSE: ADM

Market cap: $32.6 billion

Sector: Food & Beverages

Recommendation: Buy


Large global oilseed crusher, will be key feedstock supplier to renewable diesel industry.

Tesco PLCMarkets Insider

Ticker: LON: TSCO

Market cap: $28.87 billion

Sector: Retail - Staples

Recommendation: Buy


Strong plastics-use and food waste reduction efforts. Supply chain engagement and targets to increase share of sustainably sourced food.

Midea Group Co LtdTradingView

Ticker: SHE: 000333

Market cap: $93.01 billion

Sector: Consumer Durables

Recommendation: Buy


Increasingly automating production within factories to reduce resource consumption.

Aramex PJSCTradingView

Ticker: SHE: 000333

Market cap: $1.5 billion

Sector: Logistics & Shipping

Recommendation: Buy


1% of annual pre-tax profit budgeted for sustainability projects. Have reduced total emissions 25% per shipment since 2012.

See the rest of the story at Business Insider

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