Sustainable businesses will emerge even stronger from the crisis
During times of crisis, investors used to retreat into tried and trusted safe havens, such as gold or long-dated government bonds, while sustainable investing was viewed as a fashion or something of a luxury during uncertain times. I have even heard the argument that investors have too much on their minds right now to consider sustainable investing.
This thinking belongs in the past. Companies taking care of their stakeholders while monitoring externalities are benefiting from their commitment. Funds investing in companies with strong environmental, social and governance (ESG) policies have outperformed their benchmarks not only this year but over recent years1. From a risk management perspective, backing those companies is logically the right decision to make.
And this is just the start. We are already witnessing a major change in corporate behaviour: hundreds of companies have been forced to publicly re-assess their relationships with their customers, employees, suppliers and the wider community. Recent research2 has evidenced those which performed well during the height of the COVID crisis have demonstrated superior product, health, safety and workforce policy scores. Firms that truly value their stakeholder relationships will be well placed to emerge stronger from this crisis.
It is now our governments’ and everyone’s responsibility to make sure this really happens
Alliance for a green recovery
Some market participants and some EU Member states suggest that environmental-related targets may be suspended indefinitely. For instance, the Cop26 climate talks have been postponed until 2021, but there needs to be more concerted efforts not to derail the EU Green Deal and provide as much green spending as possible in the economic recovery plan. For this reason, Carmignac joined the Members of the European Parliament (MEPs) and the CEOs of large corporations and asset managers in the ‘EU Alliance for a Green Recovery’ to support and accelerate the transition towards climate neutrality and healthy ecosystems. It is now our governments’ and everyone’s responsibility to make sure this really happens.
Social responsibility is unleashing companies from the shackles of short-termism
It’s increasingly likely that in an environment where cutting dividends is both financially prudent and ‘the right thing to do’, we could see more companies investing into solutions both innovative and virtuous instead of maintaining investment in legacy businesses that we know offer decreasing profitability. Forward-thinking firms now have the opportunity to capitalise on their prime positions being unleashed from the shackles of short-termism.
We are learning to adapt to this new equation and are trying to define a new normal. In this environment, sustainable investment funds are confirming their efficiency in managing underlying risks and delivering more resilient returns, precisely because they support and finance companies acting for the wellbeing of the planet and society. For investors, there’s a clear rationale and opportunity to consider sustainable investment funds as we believe these are the investments capable of delivering robust returns in a post-COVID environment.
NextEra Energy (NEE)
NextEra is the largest electric utility by market cap. Over the last few decades, the company has been consistently reducing its emissions through increased renewable energy use. Its CO2 emissions are 55% less than those of an average US utility. NextEra has now set an ambitious goal of reducing CO2 emissions, by 2025, by 67% from its 2005 base levels. This goal effectively means that absolute CO2 emissions would go down by 40% even while NextEra’s energy production would double during that time. To its credit, the company last year received a best-in-class preparedness assessment by S&P Global Ratings’ ESG Evaluation. NextEra has, essentially, received the highest ranking given by S&P to a company within the utility sector.
Read NextEra Energy’s latest ESG Reports in AlphaSense, including:
NVIDIA is well-known for making graphic cards and also for supplying chips to cryptocurrency miners. Minerals are something that NVIDIA uses extensively for its chips and cards; thus, NVIDIA is closely linked to environmental and social issues related to mining.
NVIDIA is a highly-rated ESG company because it has a stringent policy regarding conflict minerals. The company has specific due diligence procedures to ensure that it never uses conflict minerals in its products. The company is also big on the governance aspect as it trains nearly 100% of its customer/supplier/partner-facing workforce for anti-corruption and anti-bribery.
Read NVIDIA’s latest ESG Reports in AlphaSense, including:
Chr. Hansen (CHR.DK)
Chr. Hansen is a Danish bioscience company that operates in the human nutrition space. It specializes in producing bacteria that reduce pesticide usage, increase crop yield, and curb food wastage. From a sustainability standpoint, improving food security and reducing waste are essential milestones. Therefore, the company’s business model is inherently ESG-friendly.
The company has also developed a unique accounting system that measures the impact of its products against the UN’s Sustainable Development Goals. No wonder Chr. Hansen is the number one ranked company on the Corporate Knights Global 100 Most Sustainable Corporations in the World list.
Read Chr. Hansen’s latest ESG Reports in AlphaSense, including:
Microsoft has taken the lead in its commitment towards carbon mitigation by becoming the first company among its peers to target “carbon negative” status by 2030. It has created a $1 billion fund to reduce emissions and start clearing carbon. This ambitious commitment is unprecedented and sets Microsoft apart from its entire sector. Microsoft received the highest ESG rating of AAA from MSCI ESG Research in September 2019.
Excerpt from Microsoft’s Q1 2020 Earnings Call Transcript: In closing, we are expanding our opportunity across all our businesses. Along with this opportunity, we recognize the responsibility we have to ensure the technology we build is always inclusive, trusted and is creating more sustainable world. Our customers see this urgent need and are looking to us in partnership with them to take action. That’s why we announced an ambitious new sustainability commitment. Microsoft will be carbon negative by 2030. And by 2050, we will remove all the carbon we have emitted since the company was founded in 1975. And our $1 billion Climate Innovation Fund will accelerate the development of carbon reduction and removal technologies. We will continue to innovate alongside customers with profitable, sustainable solutions that expand our opportunity.
Read Microsoft’s latest ESG Reports in AlphaSense, including:
Home Depot (HD)
As the largest home improvement retailer in the US, Home Depot tends to deal with multiple wood-based products. However, the company has a strict sourcing policy that prevents the purchase of conflict minerals and exploits the natural resources of developing countries. Home Depot also plans to reduce its emissions by 40% by 2030 and 50% by 2035. Another big goal is to help Home Depot consumers reduce their water consumption by 250 billion gallons. There are a total of seven focus areas on which the company is working to become a sustainable and responsible enterprise.
Read Home Depot’s latest ESG Reports in AlphaSense, including:
Prologis is a logistics-focused REIT with multiple “first company to…” accomplishments in the ESG space. Prologis is the first real estate company to issue green bonds. It is also the first real estate company to be awarded the WELL certification by the International WELL Building Institute (IWBI). Additionally, Prologis is the first logistics company to receive approved SBTs or “Science-Based Targets” necessary to meet the goals outlined in the Paris Agreement of 2015. The company ranks highly on the Corporate Knights Global 100 Most Sustainable Corporations in the World list and on the Investor’s Business Daily (IBD) 50 Best ESG Companies list.
Read Prologis’s latest ESG Reports in AlphaSense, including:
Emcor Group (EME)
Emcor is a construction and infrastructure company. It is a highly-rated ESG company because it pursues all the components, namely the E, the S, and the G. The company implements its green energy solutions in multiple areas of its operations. On the social aspect, the company is engaged in eliminating the gender pay gap and removing exploitation from its global supply chain. On the governance front, the company has given unprecedented encouragement to its employees to flag any ethics breaches. Emcor stands out as an excellent all-round ESG-compliant business.
Read Emcor’s latest ESG Reports in AlphaSense, including:
West Pharmaceutical Services (WST)
Rated as one West Pharmaceutical Services is a Pennsylvania-based medical supplies company that operates as a key supplier to firms in the pharmaceutical, biotechnology, and generic drug industries. West develops, manufactures, and distributes elastomer-based supplies for the containment and administration of injectable drugs, including basic equipment such as syringes, stoppers, and plungers, along with somewhat more complicated devices including auto-injectors and other self-injection platforms. Their commitment to ESG is largely focused on Compliance and Ethics; Diversity and Talent; Health and Safety; Philanthropy; Environmental Sustainability; and Quality.
Read West Pharmaceutical Services’ latest ESG Reports in AlphaSense, including:
- West Pharmaceutical Services Corporate Responsibility Report
- West Pharmaceutical Services Code of Business Conduct
Salesforce has some important goal-based ESG initiatives in place–it has committed 1 million employee hours to the UN’s Sustainable Development Goals. Salesforce has also joined the UN Global Compact, a platform for companies to align with responsible business practices. Plus, the company recently launched Salesforce Sustainability Cloud, a system that helps businesses track, analyze, and report vital environmental information.
These actions can ultimately help in the overall reduction of carbon emissions. In early 2020, the company launched 1t.org, an initiative to connect, empower, and mobilize global restoration of 100 million trees.
Read Salesforces’ latest ESG Reports in AlphaSense, including:
This UK-based pharmaceutical giant has some giant ESG initiatives. It has made a total of 13 commitments that contribute to various UN Sustainable Development Goals. The company aims to reduce its environmental impact by 25% by 2030.
On the social front, the company aims to reach 800 million underserved people by 2025. On the governance front, GSK is working towards greater female representation in senior roles and LGBT advancement. All of the company’s goals and the progress towards those goals are published in an annual summary report.
Read GlaxoSmithKline’s latest ESG Reports in AlphaSense, including: