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TheStreet Open House

Responsible Investing: 5 Undervalued Stocks With High CSR Ratings

James Dennin, Kapitall: We found 5 stocks with high ratings for corporate social responsibility, and strong earnings growth for 2014.  

According to Dale Wannen, President of Sustainvest Asset Management, s ustainable and r esponsible i nvesting (SRI) is one of the fastest growing investment disciplines in the U.S, growing 22% between 2010 and 2012. Dale specializes in SRI, and his  fund uses a variety of asset classes, from private equity to venture capital,  to gain a competitive return while also supporting companies and products with high standards of corporate social responsibility. 

[Read more on SRI from Kapitall: Responsible Investing: Is Your Portfolio Melting the Polar Caps?‚Äč]

SRI considers environmental, social and corporate governance criteria (ESG) to generate long-term competitive financial returns along with positive societal impact. Overall today, one in nine dollars under professional management use strategies that take ESG into account.

So we decided to run a screen looking for stocks that have been able to pair strong earnings growth with high ratings in regards to their ESG. To do that we started off with the 50 companies on CSRHub's Corporate Social Responsibility Index. These were the highest scoring companies with regards to:

  • Corporate Citizenship: Looks at a company's impact on the community. Companies that donate a lot to charity, and work to protect the surrounding environments score highly in this category.
  • Corporate Governance: Takes into account how a company is run. This score is based on transparency, shareholder rights, and the makeup of a company's board. As Wannen says, advisory shareholder resolutions are "crucial" to ESG, because they are usually how these kinds of issues get brought to the attention of company management. 
  • Workplace: Looks at training, employee pay, and the happiness of workers. 

The scores used in the index are a composite of the scores in these three separate categories.

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