Investors are increasingly looking for companies that excel in climate transition efforts to enhance their competitiveness. Research by Morningstar Sustainalytics has identified 21 leaders in this sector, focusing on firms that are making substantial commitments to sustainability. This list spans various industries, including notable names like Johnson & Johnson, Air Liquide, Enel SpA, and Pernod Ricard. The findings aim to equip investors with valuable insights to make informed decisions.
The research highlights the importance of understanding climate risks and the proactive measures companies are taking to adapt. Many firms still fail to establish actionable targets, leaving future leadership to address ongoing climate challenges. Visionary executives recognize that enhancing their competitive edge is vital for mitigating risks and ensuring the long-term stability of their cash flows. The costs associated with inaction can be severe, potentially jeopardizing a company’s survival. Conversely, substantial opportunities arise as governments and corporations invest heavily in decarbonization initiatives.
Criteria for Identifying Climate Transition Leaders
Sustainalytics employs a unique set of standards to distinguish true leaders in the climate transition landscape. The goal is to clearly differentiate companies that demonstrate genuine commitment from those that engage in mere symbolic gestures. Key screening criteria include:
– Low Carbon Transition Rating scores of 55 or higher
– Carbon Intensity Trend indicator scores of 50 or above
– Controversy event level ratings of Category 3 or below
Additionally, only companies listed in the Low Carbon Transition Leaders Index were considered. These measures ensure that identified leaders are not only setting ambitious targets but are also making consistent progress in reducing greenhouse gas emissions. Furthermore, they must not be embroiled in significant controversies related to transition risks.
The inaugural list will be updated annually to reflect changes in leadership among companies committed to a low-carbon future.
Five Undervalued Companies Leading the Charge
Based on a combination of Sustainalytics’ climate transition leaders and Morningstar Equity Research data, several companies stand out as undervalued and worthy of investor attention. Here are five key players:
Clorox (★★★★★): Established over a century ago, Clorox has diversified its offerings to include cleaning supplies, laundry care, and personal care products. More than 80% of the company’s sales are generated in its home market.
Air Liquide (★★★★): Founded in 1902, this industrial gas giant serves over 3.8 million customers across 78 countries. In 2024, Air Liquide reported approximately EUR 27.1 billion in revenue, catering to industries such as healthcare and electronics.
Sanofi (★★★★): This pharmaceutical company focuses on immunology, vaccines, and rare diseases. Its primary revenue driver, Dupixent, accounts for roughly 30% of total sales, with significant contributions from the United States and Europe.
Henkel AG & Co (★★★★): Henkel operates in two main segments: consumer products and adhesives technologies. Approximately 50% of its consolidated sales in 2024 came from laundry and home care products, with Europe being a significant market.
Pernod Ricard (★★★★): Formed in 1975, Pernod Ricard has grown into the world’s second-largest distiller by volume. The company boasts a vast portfolio of over 240 brands, including well-known spirits like Absolut vodka and Jameson Irish whiskey.
Investors seeking to align their portfolios with sustainable practices have a compelling opportunity with these undervalued climate transition leaders. For those interested in the full list of Sustainalytics’ climate transition leaders, further details are available through their research publications.
