What is ESG investing?

In recent times, different segments of the market have leaned towards socially responsible investing, or sustainable investing, i.e. environmental, social and governance (ESG) investing. This approach aims to invest in shares of companies that have a positive impact, such as Xylem (XYL) (GB:0M29) and the NextEra Energy stock (BORN) (GB: 0K80). ESG investing considers companies that focus on sustainability, clean energy, social justice, or work to mitigate climate change.

One name that has been at the forefront of this wave is Bill Gates, the founder of Microsoft. Gates recently acquired shares worth $77 million in Ecolab (ECL) (GB:0IFA), which provides water, hygiene and infection prevention solutions in more than 170 countries. Let’s take a look at two promising names in the ESG space that could boost your portfolio.

Xylem is a water technology company that provides solutions to optimize water use and resource management. Its offerings enable communities in more than 150 countries to access water security.

Its three business segments, Water Infrastructure (water distribution, transportation and wastewater treatment), Applied Water (industrial, residential and commercial building operations) and Measurement and Control Solutions (smart meters, analytics and network technologies ), are dedicated to better manage water resources.

Additionally, Xylem’s efforts to decarbonize the water sector helped it win the Net Zero Carbon Champion award at the 2022 Global Water Awards this year. Impressively, its offerings prevented over 500 billion gallons of polluted water from flooding in 2021. The company also helped customers reuse over 285 billion gallons of water last year.

Is Xylem Stock a Buy?

Four out of 13 analysts who have rated Xylem stock over the past three months believe it is a buy. Argus Research analyst John Eade reiterated a buy rating on XYL stock while raising the price target to $115 from $100. This implies a 19.6% upside potential for the stock on top of the nearly 14% price gain over the past month. Overall, the Street has a Moderate Buy consensus rating on Xylem shares alongside an average price target of $96.90.

With a capacity of 58 GW (gigawatt), NextEra is a leader in clean energy. He owns Florida Power & Light Company, the largest electric utility in the United States. Its clean energy unit, NextEra Energy Resources, is the world’s largest producer of wind and solar power.

NextEra won the S&P Global Platts 2020 Energy Transition Award for its progress on the ESG front. This year, he set a Real Zero goal of making his operations carbon-free by 2045. He sees the drive to decarbonize the US economy as a $4 trillion market opportunity. NextEra plans to generate only carbon-free energy through a mix of solar, wind, green hydrogen, nuclear, battery storage and other renewable energy sources.

Additionally, NextEra estimates that achieving this goal could also create 150,000 jobs and contribute $15 billion to Florida’s Gross Domestic Product (GDP) by 2045. Additionally, the company stands to benefit from the proposed climate law.

Is Nee a buy or a sell?

Eight out of 12 analysts who have rated NEE stock over the past three months have rated it as a buy. JP Morgan’s Jeremy Tonet reiterated a buy rating on NEE stock and sees upside potential of 20.48% based on a price target of $106. Overall, the street has a Moderate Buy consensus rating, with an average NextEra price target of $94.36.

Is socially responsible investing worth it?

Socially Responsible Investing or ESG continues to gain traction as the world witnesses the devastating and now recurring effects of climate change. In this dynamic, Xylem and NextEra play a key role in making capitalism more sustainable.

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