An Argus Research Portfolio for Sustainable Impact Stocks

06/25/2019 5:00 am EST

Focus: STRATEGIES

John Eade

Chairman and CEO, Argus Research Group

Sustainable Impact investing is gaining traction not only with our clients, but also with the global investment community, observes John Eade, an analyst with Argus Research, a leading independent Wall Street research firm.

According to the Forum for Sustainable and Responsible Investment, assets under management in the strategy globally has grown to $11.6 trillion in 2018 from $178 billion in 2005.

The UN Principles for Responsible Investing — to which Argus Research is a signatory — now represents more than 1,750 signatories with assets of U.S. $70 trillion, according to BMO Global Asset Management.

As assets have flowed in, Sustainable Impact investing has evolved. The discipline, originally known as Socially Responsible Investing, focused at first on excluding companies that conducted business in South Africa, or participated in industries such as tobacco, alcohol and firearms.

In time, the list of industries to avoid increased to include soft drinks, fast food, and oil and gas, among numerous others. Performance of these initial strategies lagged, and the approach subsequently has been modified.

Now, instead of merely identifying industries to avoid, the discipline promotes “sustainable” business practices across all industries that can have an “impact” on global issues such as the climate, hunger, poverty, disease, shelter and workers’ rights. And AUM continues to grow.

Due to many requests, Argus has designed a diversified portfolio to take advantage of the ESG (Environmental, Social and Governance) investing trend.

We built our Model Portfolio by identifying companies that are either BUY or HOLD-rated by Argus analysts, and also score highly on custom ESG criteria established by Institutional Shareholder Services Inc (ISS).

ISS is a leading provider of objective research and technology solutions that help financial professionals evaluate the environmental, social and governance performance of companies.

Below are 10 stocks featured in the Portfolio. All are rated "buy".

Alphabet Inc. (GOOGL)

Alphabet is “raising the bar” in making smart use of the earth’s resources, expecting the highest ethical standards throughout its supply chain and creating products with people and the planet in mind. As an example, Alphabet’s Global Fishing Watch platform is being used by scientists to protect critical marine habitats.

Ecolab Inc. (ECL)

For the fifth consecutive year in 2018, Ecolab, the global leader in water, hygiene and energy technologies and services, is ranked in the top 10 on Corporate Responsibility (CR) Magazine’s 100 Best Corporate Citizens list. This list recognizes the environmental, social and governance (ESG) performance of public companies in the U.S. Ecolab ranks eighth on the 2018 Best Corporate Citizens list.

Johnson & Johnson (JNJ)

JNJ’s Health for Humanity 2020 goals focus on People -- helping them be healthier by providing better access and care in more places around the world; Places -- making the places where the company has a presence healthier by using fewer resources; and Practices -- teaming with partners and employees to create a culture of health and well-being.

JPMorgan Chase & Co. (JPM)

This bank promotes a diverse and inclusive culture. Two female executives, Marianne Lake, the CFO, and Jennifer Piepszak, who was running the company’s credit card business, are at the top of the list to replace long-time CEO James Dimon.

McDonald’s Corp. (MCD)

In 2014, the company launched McDonald’s Global Sustainability Framework, which established 2020 aspirational goals across a series of social and environmental topics in pillars called Food, Planet and Sourcing. The company has made progress on a number of the goals.

Microsoft Corp. (MSFT)

Microsoft has the highest score (at 96) in the Argus U.S. ESG Model Portfolio. The company has been recognized for its commitment to ESG principles by Forbes Magazine, FTSE Russell, Euronext, Corporate Responsibility Magazine, the Carbon Disclosure Project, MSCI and Dow Jones, among others.

Norfolk Southern Corp. (NSC)

Norfolk Southern has produced a sustainability report, Strides in Stewardship, for the past 10 years. Recent highlights include achieving record locomotive fuel efficiency and saving approximately 7.4 million gallons of diesel fuel; and rolling out a safety train that provides first responders across the railroad’s network.

PNC Financial Services Group Inc. (PNC)

PNC prioritizes the communities in which it does business through local leadership and collaboration with local groups. In 2017, PNC supported its communities through $72 million in charitable giving, including both charitable sponsorships and PNC Foundation grants.

Waste Management Inc. (WM)

Waste Management is committed to the highest standards of environmental, social and governance practices. The company has been named 2018 sector leader on the Dow Jones Sustainability Index for Commercial Services and Supplies and has been included on the Dow Jones Sustainability Index for North America and/or the world for 13 of the past 16 years.

WEC Energy Group Inc. (WEC)

This Midwestern utility has set aggressive goals to reduce carbon dioxide emissions by approximately 40% (to below 2005 levels) by 2030 and 80% by 2050.

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