Top Mid-Cap Stocks Widely Owned by ESG Funds

What mid-cap stocks do sustainable funds own? Good question. Many times, the difference between what sustainable and traditional funds own can be minor. Both types of funds hold stocks that limit risk, have room to grow, and are expected to perform well. ESG funds can follow a wide range of approaches, but in practice, many own the same stocks as conventional funds, though to different degrees, as we’ll see below.

Thus, searching for the ones that sustainable funds own uniquely—meaning that they’re in sustainable funds, not conventional funds—can unearth companies considered promising for sustainability-related themes, such as the climate transition.

What’s a Mid-Cap Stock?

We sort stocks by region, such as the United States or Latin America, and then classify them as giant, large, mid, small, and micro based on market capitalization. In the United States, mid-cap stocks range from a market cap of $11.2 billion to $66.3 billion, which will be the focus of our study. To learn more about market capitalization in Morningstar Categories, download the US fund methodology paper.

Our Methodology

We compiled the holdings of the oldest share classes of all US mid-cap funds. Next, we put the top 200 stocks that are commonly owned into a theoretical portfolio. Then, we calculated what the average weight of each security would be if this portfolio held all 200 stocks. We did the same with traditional funds, defining the universe as the oldest share class of mid-cap funds, excluding sustainable funds.

By doing so, we can find stocks unique to sustainable funds in the mid-cap universe. Securities that are held in sustainable funds but not conventional ones are considered “unique.” We can also gain insight on which stocks are commonly held between sustainable and traditional portfolios.

Mid-Cap Stocks Unique to ESG Funds

We found five stocks owned exclusively by mid-cap sustainable funds. We describe them below.

We also ranked the mid-cap stocks for cheapness. Here are the three most undervalued, based on Morningstar’s price/fair value estimate.

First Solar

“First Solar’s financial strength stands alone relative to solar module peers. We consider this a competitive advantage because it allows First Solar more flexibility to take advantage of investment opportunities. The company had approximately $900 million of cash as of March 31, 2025. First Solar’s financial strength is in part due to its conservative approach to expanding capacity, which is in stark contrast to the record of the broader industry.”

—Brett Castelli, Morningstar Equity Research Analyst

McCormick

“As the leading player in the $16.5 billion global spices and herbs market—with nearly 20% share, 4 times the next-largest branded operator, according to Euromonitor—McCormick is a valuable partner for retailers.

“We believe McCormick’s balance sheet strength will enable it to weather the current volatile macro and competitive landscape relatively unscathed. McCormick ended fiscal 2024 with about $200 million in cash and free cash flow as a percentage of sales of 11% (about double the mid-single-digit average it chalked up on average the prior five years). We expect its cash-generative ability to persist; we forecast free cash flow to the firm to average around $1 billion annually through fiscal 2029 (almost 14% of sales). As such, we posit McCormick should be able to invest to enhance its capacity and capabilities while also returning cash to shareholders through dividends and share repurchases.”

—Erin Lash, Morningstar Equity Research Analyst

Xylem

“Xylem is one of the leading water technology companies in the world. Its extensive portfolio spans a wide range of equipment and solutions for the water industry, including the transport, treatment, testing, and efficient use of water for public utilities as well as industrial, commercial, and residential customers.

“We think Xylem has carved a narrow moat due to customer switching costs and intangible assets. Xylem’s large installed base of equipment generates recurring revenue driven by aftermarket service and replacement parts in the water infrastructure segment, replacement parts in the applied water segment, and long-term contracts (up to 15–20 years) in the measurement and control solutions segment. The company’s moat is bolstered by intangible assets, including an extensive patent portfolio, reputable brands, and strong dealer relationships.”

—Krzysztof Smalec, Morningstar Equity Research Analyst