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Sustainability Matters

As Sustainable Stocks Rally, Valuations Grow Fatter

But cheap names remain, including Salesforce.com, Adobe, and Disney.

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Sustainability minded investors were rewarded with a favorable 2021, as the Morningstar indexes focused on stocks facing the lowest environmental, social, and governance risk outperformed the broader market. (The risk metrics are supplied by Sustainalytics, a Morningstar company.) All this came despite a rally in the oil and gas stocks that many sustainable investors try to limit in their portfolios. 

But, as the mantra goes, the past doesn't predict the future; yesterday's outperformance could lead to tomorrow's overvalued stocks. To that end, the Morningstar Ratings assigned by our equity research analysts can provide guidance to whether companies with positive ESG credentials also fit the bill for long-term investment at current prices. 

Adam Fleck has a position in the following securities mentioned above: CRM, DIS. Find out about Morningstar’s editorial policies.