It’s ESG week here at Morningstar so instead of looking for undervalued stocks we’re seeking out the most sustainable ones.
This is harder than it looks. We could immediately look at renewable energy companies of course – wind farms, solar panel makers – but being an ESG investor is about more than just finding environmental leaders. Of the nine thousand companies in the Morningstar universe, only 13 companies have the highest ESG rating of 5 globes – and only three are covered by our analysts. In the UK market, that leaves fashion group Burberry, educational publisher Pearson and REL-X, the data and events company formerly known as Reed Elsevier.
Morningstar Sustainalytics ranks REL-X as the company with the lowest carbon risk among the 10,000-plus stocks it rates with a perfect score of zero. It’s also a leader in corporate governance, scoring highly on a number of metrics relating to ownership and shareholder tights, board structure and stakeholder governance.
If you think longevity is a good thing for leaders, you’ll be pleased to learn that the company’s CEO, Erik Engstrom, has been in charge for 13 years now. Before that he was chief executive of Elsevier, which became part of the RELX group, for five years.
RELX’s shares have shown little volatility this year amid the turmoil. But they are now overvalued, according to Morningstar analyst Michael Field, with a ONE STAR RATING. This goes to show that finding keenly priced ESG leaders can be a tricky proposition, especially in Europe.
For Morningstar, I’m James Gard.
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