11 Undervalued Climate-Friendly Stocks
These companies are well-positioned for a world less dependent on fossil fuels.
To find companies that can effectively compete in the transition to a low-carbon economy, investors can turn to the Morningstar US Low Carbon Risk Index. The index features large- and mid-cap stocks that have undergone a carbon risk assessment by Sustainalytics, Morningstar's ESG research partner. The index is powered by the same carbon risk assessment and fossil fuel involvement methodology behind our Morningstar Portfolio Carbon Metrics for funds. The assessment captures how vulnerable a company is in the transition away from a fossil-fuel-heavy economy.
Specifically, the index's investable universe includes large- and mid-cap stocks to which Sustainalytics has assigned a carbon risk score. Those companies deemed to have severe carbon risk are excluded from the list. Companies are then weighted based on their carbon risk scores through an optimization process that controls for maximum position size, sector weights relative to its benchmark, and other factors.
The below constituents from the index's portfolio are all at least 20% undervalued as of this writing and carry only negligible carbon risk classifications. They are all ideas to investigate further if you're looking for reasonably priced companies that are well-positioned for a low-carbon economy.
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Susan Dziubinski does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.