Which companies are using the climate transition to improve their competitiveness?

Our climate transition leaders’ research from Morningstar Sustainalytics aims to identify front-runners in this space, adding clarity and rigor while empowering investors to make better investing decisions. Our inaugural list of 21 climate transition leaders looks at a wide spectrum of sectors, including companies such as Johnson & Johnson JNJ, Air Liquide, Enel SpA ENEL, and Pernod Richard RI. You can see the full list here. Below, we’ve also identified which ones look undervalued.

Understanding climate risks and how different sectors and companies are making changes to adapt is critical for investors. Too often, though, companies don’t set actionable targets, leaving climate risks and opportunities to a future generation of CEOs to resolve. The most forward-looking executives and CEOs are seeking to improve their competitive position in order to mitigate risks and protect the durability of their firm’s cash flow. For many companies, the cost of inaction is steep and could even threaten their survival. The opportunities are similarly large with governments and corporations who are committing massive sums to decarbonization efforts.

How We Found Our Climate Transition Leaders

Sustainalytics has created a unique set of standards to identify the most impressive companies. We want to differentiate clearly between companies that lead versus ones that make a perfunctory or symbolic effort only. Our screening criteria consider efforts toward emissions reductions, the existence of rigorous targets, and good climate governance.

Explicit parameters include the following data points from Morningstar Sustainalytics’ research products: Low Carbon Transition Rating scores of 55 or greater; a Carbon Intensity Trend indicator score of 50 or higher; and a Controversy event level rating of Category 3 or below. We also screened for companies in the Low Carbon Transition Leaders Index. These measures ensure that our climate leaders are setting ambitious targets and continuously making progress against them, that they have already achieved a substantial reduction in greenhouse gas emissions intensity in recent years, and they are not involved in significant controversies related to transition risks. Sustainalytics’ inaugural list comprises 21 climate transition leaders, and we intend to revisit this list annually. What distinguishes a company as a leader in the low-carbon transition? While each company is unique, and every global sector carries its own nuances, there are common dimensions that help identify leaders across sectors. It is essential to take a holistic view.

Investors should consider the following key questions to identify leaders:

• Does the company recognize transition risks in its value chain while maintaining integrity in its reporting?
• What concrete actions is the company taking to mitigate these risks?
• What are the measurable effects in both the short and long term?
• Is the company exposed to any significant controversies related to transition risks?

5 Undervalued Companies Leading the Climate Transition

Source: Morningstar Equity Research. Data as of Oct. 30, 2025.

Combining our climate transition leaders with our Morningstar Equity Research data points, we observe several undervalued 4- and 5-star names worthy of investors’ consideration.

Clorox (★★★★★)

Since its beginning more than 100 years ago, Clorox CLX has expanded to operate in a variety of consumer products categories, including cleaning supplies, laundry care, trash bags, cat litter, charcoal, food dressings, water-filtration products, and natural personal-care products. Beyond its namesake brand, the firm’s portfolio includes Liquid-Plumr, Pine-Sol, S.O.S, Tilex, Kingsford, Fresh Step, Glad, Hidden Valley, KC Masterpiece, Brita, and Burt’s Bees. More than 80% of Clorox’s sales come from its home turf.

Air Liquide (★★★★) Founded in 1902, Air Liquide is one of the leading industrial gas companies in the world, serving over 3.8 million customers in 78 countries. The company generated approximately EUR 27.1 billion of revenue in 2024, serving a wide range of industries, including chemicals, energy, healthcare, food and beverage, and electronics. Air Liquide employs approximately 65,000 people.

Sanofi (★★★★)

Sanofi SAN develops and markets drugs with a concentration in immunology, vaccines, and rare diseases. Although the company offers a diverse array of drugs, its highest revenue generator, Dupixent, accounts for approximately 30% of total sales. Profits for this immunology blockbuster drug are shared with Regeneron. About 45% of total revenue comes from the United States, 20% from Europe, and 6% from China.

Henkel AG & Co (★★★★)

Two distinct customer groups constitute Henkel HEN. The consumer segment (around 50% of consolidated 2024 sales) is laundry and home care, including the Persil and Purex laundry detergent brands, and beauty care, including the Schwarzkopf brand in haircare and the Dial brand in hand soap. The adhesives technologies segment makes up the remaining 50% of sales. Sales from Europe accounted for 37% of the firm’s consolidated total in 2024, while Asia-Pacific and North America accounted for 16% and 28%, respectively.

Pernod Ricard SA (★★★★)

Pernod Ricard was formed in 1975 through the merger of Pernod, founded in 1805, and Ricard, created in 1932. Through acquisitions, the firm has grown to become the world’s second-largest distiller by volume, behind Diageo. Pernod Ricard possesses the most comprehensive spirits portfolio globally, distributing over 240 brands across 160 countries. Flagship spirits brands include Absolut vodka, Beefeater Gin, Chivas Regal and The Glenlivet Scotch whisky, Jameson Irish whiskey, Malibu Rum, and Martell cognac. The firm has also shed noncore assets over the years, including several wine brands in 2024.

To see the full list of Sustainalytics’ Climate Transition Leaders, read this