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How Are Energy and Utilities Companies Managing ESG Risk?

Our analysts examine the utilities, integrated oils, and midstream industries through the lens of ESG.

Susan Dziubinski: Hi, I'm Susan Dziubinski from Morningstar.com. Our equity analysts have been taking deep dives into the impact that ESG issues are having on their respective industries. Today, we're taking a look at what impact ESG issues are having in the utilities, integrated oils, and midstream industries, and what companies are best positioned to benefit.

Travis Miller: Renewable energy in the U.S. is becoming a huge part of the energy landscape and it's only going to grow during the next decade. Right now, renewable energy makes up about 10% of the power generation mix in the U.S. That, we think is going to grow to over 20% by 2030. State policies are a big growth driver and corporate renewable energy purchases from companies like Facebook and Amazon and Google are all driving a lot of renewable energy growth. A lot of people now know utilities like NextEra Energy and Xcel Energy, even First Solar on the solar manufacturing side, as big players in this renewable energy growth. But there are many other utilities that we think benefit from this growth in renewable energy. Investments in Edison International, NiSource, CMS Energy, those should all pay off with some very good growth in dividends and earnings over the next decade as they invest in renewable energy and all the infrastructure that goes with it. One place that investors haven't looked at before, where we think there's value, is in those distribution and small wires and transmission wires that allow renewable energy to connect to the load centers. Again, in this realm, Edison International is a big player, CMS Energy is going to be a big investor, and NiSource connecting in Indiana and elsewhere in the Midwest the renewable energy to their system.

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