Many investors aim to align their personal values (in relation to environmental protection, social justice, and ethical governance, or ESG) with their portfolios. This is where sustainable shares come in. And here in the UK, there are many stocks that allow investors to support companies that share their values while still creating wealth over the long term… Sounds pretty Foolish to me!
Croda International
What it does: Croda International sustainably creates speciality chemicals to enhance products in a wide range of industries.
By Oliver Rodzianko. Croda International (LSE:CRDA) has “committed to becoming the most sustainable supplier of innovative ingredients on the planet”.
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Not only is the company leading in environmental preservation efforts, but it’s also making a handsome profit in the process. Over the past 10 years, the shares have grown 78% in price. It also has a net margin of 10%, which is great for its industry.
Recently, it has hired sustainability expert Aris Vrettos. Bringing 15 years of top-class experience, I think this is going to even further deepen the sustainable future of Croda.
Now, I must mention that in the past, it has faced legal action over negative effects on the environment from a plant it operated. There’s some chance that something like this could happen again, which would be bad reputationally.
But overall, this company looks very strong to me. I appreciate its efforts in getting toward a cleaner, safer work culture.
Oliver Rodzianko does not own shares in Croda International.
Gore Street Energy Storage Fund
What it does: Gore Street Energy Storage Fund invests in power retention assets across Europe and the US.
By Royston Wild. If renewable energy is to take over from dirtier sources, the energy supplied by wind, solar and tidal sources will need to be reliable. Regular power cuts are not acceptable for any developed economy.
This is why Gore Street Energy Storage Fund (LSE:GSF) has a large and growing market to exploit. This small cap invests in utility-scale power storage assets with the aim of providing regular dividend income to its shareholders.
Today its objective is to provide annual dividends equivalent to 7% of net asset value (NAV) per ordinary share, or 7p per share, whichever is higher. It’s a strategy that creates a chunky 5.1% dividend yield for the current financial year.
Gore Street’s share price, like those of many renewable energy and property stocks, has been under pressure due to higher-than-normal interest rates. This could remain a problem, too, if inflation fails to drop significantly.
However, at current prices I think the trust is worth serious consideration. At 60.3p per share, it trades at a whopping 43% discount to its estimated NAV.
Royston Wild does not own shares in Gore Street Energy Storage Fund.
Renewi
What it does: Renewi is a European waste management company that uses most of the waste collected for recycling or energy production.
By Christopher Ruane. When Australian infrastructure-focused asset manager Macquarie made a takeover bid for Renewi (LSE: RWI) last year, it was rejected as undervaluing the company.
Since then, Renewi shares have fallen below the bid level. But the share price has still grown by an impressive 72% over the past five years.
Renewi shares trade on a price-to-earnings ratio of 12, which I think looks cheap. Whether that turns out to be the case depends partly on Renewi maintaining or growing its earnings. The past couple of years have been good, however the track record is inconsistent.
The business is highly cash generative but has a net debt that outstrips its market capitalisation. That is a risk to long-term profitability.
I like the business’ clear strategic focus, its extensive operational footprint and its proven business model. I see long-term revenue growth opportunities. If the company can reduce its indebtedness, I think those revenues provide a solid basis for profitability.
Christopher Ruane does not own shares in Renewi.
Tesco
What it does: British multinational high street supermarket chain selling groceries and general merchandise.
By Mark David Hartley. Founded in London in 1919, Tesco (LSE:TSCO) is now one of the largest retailers in the world. It has a strong focus on sustainability initiatives, often ranking near the top of lists for environmental, social and governance (ESG) scores. I like that it uses ethical sourcing and is known for giving back to local communities, including support for local farmers and suppliers. In its stores, I often see promotions for fair trade products and healthy, budget-friendly food options for customers.
However, it could improve more by reducing its reliance on plastic packaging and making efforts to reduce emissions from transportation and logistics. There is also some evidence to suggest its fair labor practices could be better. Overall, it scores higher than most of its competitors when it comes to ESG. I think it strikes a good balance of committing to realistic sustainability efforts without threatening its bottom line.
Mark David Hartley owns shares in Tesco.
The Renewables Infrastructure Group
What it does: The Renewables Infrastructure Group is an investment trust with a portfolio of onshore and offshore wind farms and solar parks in the UK and Europe.
By Ben McPoland. A FTSE 250 stock that I’ve been buying opportunistically over the past year is The Renewables Infrastructure Group (LSE: TRIG). It’s down 27% in two years.
One silver lining to this falling share price is that the dividend yield now stands at 7.3%. And the forecast yield for this financial year is a very attractive 7.6%.
Beyond the passive income potential, what I like here is the diversification in both assets (wind and solar farms and battery storage assets) and geography (six countries).
Unfortunately, the clean energy sector has fallen out of favour due to higher interest rates. Green projects often require significant upfront investment, and higher rates make borrowing for them more expensive. We don’t know when or by how much rates will come down. This adds uncertainty.
However, I can’t help feeling this is already more than reflected in the current valuation. The shares are trading at a whopping 23.1% discount to the estimated value of the firm’s assets.
Overall, I think there is a lot of value on offer here for patient investors.
Ben McPoland owns shares in The Renewables Infrastructure Group.
