BMO Nesbitt Burns analyst Doug Morrow has introduced a new climate opportunities screen aimed at identifying stocks that are actively engaged in addressing climate change. According to Morrow, companies that are climate-friendly are likely to be valued at a premium in the stock market due to the increasing significance of climate change as a determinant of stock valuations. This screen evaluates companies based on factors such as policies for net-zero emissions, disclosure of carbon emissions, and board oversight of climate-related targets.

Morrow highlighted the alarming increase in extreme weather events globally, estimating a six-fold rise since 1970. Citing a Swiss Re study, he noted that insurance-related losses from climate change have quadrupled since 1990. The climate opportunities screen first starts with 432 stocks ranked outperform at BMO and then assesses these companies for their efforts in reducing greenhouse gas emissions and setting policies for further reductions by 2030 or earlier.

The screening process further narrows down the list to 47 stocks by incorporating factors like Bloomberg's rating scale of physical climate risk, which takes into account emissions, effects of operations on the environment, energy use, and compliance with emissions guidelines. Stocks that make it through demonstrate a commitment to reducing carbon emissions and have a strong potential for earnings upside from global decarbonization efforts. In total, 26 companies have successfully cleared all stages of the screening process, including names like Microsoft, Pfizer, and Salesforce.com. Companies like CIBC made the list due to their targets for lowering emissions and having climate expertise on their board of directors.