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ESG companies, or ones known for their focus on environmental, social, or governance issues, have certainly come of age this year, with many seeing a stupendous rise in their stock prices. While the coronavirus pandemic has ravaged the global economy, vis-à-vis the stock markets, ESG stocks were the most sought-after as investors showed keen interest in companies that execute good governance.

What’s more, with coronavirus cases showing no signs of dropping in the United States and hospitalization rates picking up, ESG stocks will continue to be in demand next year as well. Also, ESG investing is likely to be one of the biggest trends worldwide, thanks to the emergence of eco investing. Nowadays, climate change is a grave concern, and companies sensitive to the issue in all likelihood will see investors pouring money into them. After all, an astute investor always follows the trend and in this case, it’s nothing but socially-responsible investing.

Morgan Stanley strategists, led by Jessica Alsford, as quoted in Barron’s article, said that the ESG investing revolution is expected to continue into the New Year. In fact, cash inflows into ESG funds increased significantly this year, with flows in the month of November touching $47 billion, way more than the average of $13 billion in 2019, added Morgan Stanley strategists. They further emphasized that stocks that had exposure to the European Green Deal, focused on climate change reform in the United States and China’s net-zero ambitions were the ones that have done exceedingly well this year. This gives investors more reason to indulge in sustainable and ESG investing.

Talking about the European Green Deal, the European Union has pledged to improve Europe’s climate by 2050 by applying technologies such as hydrogen and fuel cells. Similarly, in the United States, people expect more investment in clean energy products like batteries and electric vehicles (EV) sooner than later.

It’s worth pointing out that EV companies, alternative energy plays and those involved in hydrogen power generation are ESG stocks that have, in particular, seen a strong run-up in share prices this year and are most likely to witness a similar trend next year. In fact, the EV evolution is projected to continue over the next decade as people are now focusing on curbing CO2 emission. Most of the exclusive EV players have already outperformed internal combustion engine (ICE) companies this year and EV sales are further expected to climb north in 2021.

The coronavirus pandemic has also dealt a heavy blow to the coal and oil sector. Unfortunately, even with the progress in the vaccine front, the oil and gas sector couldn’t recoup from the losses suffered due to the pandemic. This has, thus, paved the way for more demand for renewables, including solar and wind energy, in the near term. To top it, relief packages will help investors tap the high-potential renewable sector, thereby creating more jobs in the solar as well as wind industries.

Lastly, the hydrogen sector has come to life, with the U.S. Department of Energy willing to make investments in companies involved in hydrogen research projects. Meanwhile, the European Union outlined its ambitious hydrogen strategy to achieve carbon neutrality in Europe by 2050.

5 ESG Stocks Worth a Look in 2021

Given the aforesaid positives, keeping an eye on solid ESG stocks in the New Year won’t be a bad proposition. We have, thus, highlighted five of the stocks that deserve your attention.

Tesla, Inc (TSLA Quick Quote TSLA - Free Report) is presently focusing more on sustainable energy by primarily selling EVs. In the United States, Tesla boasts the largest market share in the electric car segment. The company currently has a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for its next-year earnings has climbed 2% over the past 60 days. The company’s expected earnings growth rate for the next year is 58.9%. 

General Motors Company (GM Quick Quote GM - Free Report) is also aiming to catch up with Tesla in the EV segment. It also plans to launch a considerable number of electric cars in the near future. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its next-year earnings has moved 28.3% north over the past 60 days. The company’s expected earnings growth rate for the next year is 24.1%.

The AES Corporation (AES Quick Quote AES - Free Report) is known for generating electricity across the globe but is now focusing on developing renewables and energy storage. The company currently has a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for its next-year earnings has moved up 0.6% over the past 60 days. The company’s expected earnings growth rate for the next year is 12.2%.

FuelCell Energy, Inc. (FCEL Quick Quote FCEL - Free Report) specializes in generating ultra-clean power plants that generate electricity way more than conventional fossil fuel plants and does reduce greenhouse gas emissions. The company currently has a Zacks Rank #3. The Zacks Consensus Estimate for its next-year earnings has climbed 10% over the past 60 days. The company’s expected earnings growth rate for the next year is 57.1%.

Enphase Energy, Inc. (ENPH Quick Quote ENPH - Free Report) is a global energy technology company that delivers energy management technology for the solar industry. The company currently has a Zacks Rank #3. The Zacks Consensus Estimate for its next-year earnings has risen 0.6% over the past 60 days. The company’s expected earnings growth rate for the next year is 43.7%.