Goldman Sachs picks its favorite under-the-radar ESG stocks to buy right now
Analysts a t Goldman Sachs have named a raft of "under-owned" stocks across a broad range of industries which they believe have had their ESG performance overlooked by investors. Investing in stocks based on "environmental, social and governance" factors, otherwise known as sustainable investing, is a growing business. Global sustainable funds attracted $134 billion in net inflows in the third quarter, and the combined total of assets in these ESG funds hit $3.9 trillion at the end of September, according to Morningstar . Despite the rapid pace of growth in this space, some stocks with strong or improving ESG performance have remained under the radar, according to Goldman Sachs. The bank's analysts screened for underweighted companies within its ESG fund universe that stand out on operational environmental and social performance, as well as product impact. All of them have a buy rating from the bank. Within the Americas region, stocks that turned up on the bank's screen include engineering firm KBR , investment bank Jefferies , real estate investment trust Realty Income , industrial conglomerate Honeywell , energy firm Enel Chile , and software company Salesforce . The screen also turned up a slew of European stocks, including wealth manager Investec , low-cost airline easyJet , property developer Derwent London , French aircraft equipment manufacturer Safran , U.K. pharmaceutical giant GlaxoSmithKline , French utility company Engie and financial services firm Legal & General . A raft of Asian stocks made the screen too, such as Toyota , sportswear retailer Asics , BOC Hong Kong , Samsung Life Insurance , Hua Hong Semiconductor , WuXi Biologics , Jiangxi Copper and Australian mining company OZ Minerals . ESG fund favorites Goldman Sachs also studied the holdings of more than 3,000 funds globally with assets under management totaling more than $1.9 trillion to identify ESG fund favorites — stocks that have the most overweight ratings relative to their benchmark. The bank's screen turned up Japanese water treatment solutions provider Kurita Water Industries , Dutch technology firm Aalberts , Spanish renewable energy firm EDP Renovaveis , Minnesota-based water treatment firm Pentair , Israeli photovoltaics company SolarEdge , Swiss industrials manufacturer Georg Fischer and Hong Kong-listed Xinyi Solar as the most overweight stocks. In addition, Goldman screened for companies that are most widely owned by the ESG funds under analysis. Microsoft , ASML , Schneider Electric , Roche , Novo Nordisk , SAP , Nvidia , AstraZeneca and Apple made up the top 10. Thermo Fisher , Deutsche Post , LVMH , I nfineon , BNP Paribas and Texas Instruments made Goldman's list for the first time. On a sector level, "industrials, utilities, materials and healthcare — sectors with high prevalence of products directly enabling beneficial environmental and social impacts — continue to stand out as sectors most overweighted by ESG funds," the analysts said. The materials sector saw the largest increase in representation within the list, with stocks such as Belgian mining company Umicore , British chemicals firm Johnson Matthey , Danish bioscience company Chr Hansen , Danish biotechnology firm Novozymes and U.S. water and hygiene company Ecolab having the largest overweight among materials companies, the analysts said. Meanwhile, consumer staples and health care saw "modest" increases, including names such agri-food business Darling Ingredients , Swedish hygiene and health company Essity , U.S. diagnostics and life sciences firm PerkinElmer and analytical instrumentation manufacturer Agilent , the analysts added.

A Goldman Sachs sign at at NYSE. Brendan McDermid | Reuters