Travis Miller: Environmental, social, and governance issues are among the most discussed in investing right now. We recently took a look at how ESG factors impact our valuations, economic moat, and stewardship analysis.
What we did was look at the utilities that have the best opportunities to invest in ESG-related infrastructure and which have management teams that can create the most value from those investments. What we came up with were three utilities that typically don't meet the traditional ESG screens.
One is Dominion Resources. Dominion is our only wide-moat utility and is going to benefit the most from the build-out of infrastructure to support natural gas in the U.S. energy mix.
Two other utilities that passed our ESG screen are some of the largest coal-burning utilities in the U.S. One is Southern Company, which is building a new nuclear plant, investing billions of dollars in renewable energy, and is going to begin a large build-out of natural gas infrastructure in the southeast U.S. Another very similar utility is Duke Energy. It also is one of the largest coal-burning utilities in the U.S. but is rapidly transforming its generation mix to reduce its carbon profile and invest in renewable energy. Both trade near our fair value estimate and yield over 4%.