The UK isn’t usually thought of as being at the vanguard of Environmental, Social and Governance (ESG) investing. So, it may be surprising to learn that nine of the 65 global companies listed by Sustainalytics as having ‘elite’ or the top ESG ratings are UK shares.
With that being the case, here are two London-listed stocks with solid ESG credentials I’d buy with an investment of £3,000 today.
UK shares on offer
The first company I’d buy is Burberry (LSE: BRBY). While the luxury fashion house operates in a high-risk industry where working conditions are under increasing scrutiny, the company has a high ESG rating. It has targets to procure 100% sustainable cotton and source 100% of leather from tanneries with environmental, traceability and social compliance certifications by 2022.
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What’s more, in its 2019/20 financial year, Burberry reduced its market-based emissions by 86% from 2016/17 levels. It procured 83% of its total energy from renewable sources. It’s now carbon neutral across 85% of its site globally.
On top of these initiatives, Burberry is also a principal partner of The Living Wage Foundation and a member of the Global Living Wage Initiative steering group.
These actions show the company isn’t just posturing when it comes to ESG. That’s why it has one of the highest ratings of all UK shares.
Still, many of the company’s suppliers are based in Asia. This region is notorious for poor working practices and low wages. Therefore, although the enterprise closely monitors its supply chain, it still may have some exposure to unsavoury working practices. Overcoming these issues and maintaining its high standards may be the biggest challenges it faces from an ESG perspective.
Still, despite this risk, I’d buy the firm for my £3,000 portfolio of ESG UK shares.
Science-based
The other company I’d buy for its impressive ESG credentials is ITV (LSE: ITV).
This corporation is in a unique position when it comes to pushing forward ESG initiatives.
For example, in 2020, the company ran several TV campaigns for mental health, exercise and healthy eating. It also has a shared commitment of £10m with other broadcasters to support children’s health between 2020 and 2022.
As well as these initiatives, the firm wants to get 100% of its power from renewable energy by 2025 and achieve net-zero by 2030—both in terms of waste and energy.
These are some of the initiatives that have helped the group achieve one of the highest ESG ratings of all UK shares.
Despite these positive credentials, the company is struggling to grow in the highly competitive broadcasting market. Advertising sales collapsed last year, and they’ve been slow to return. This could hold back profit growth over the next few years.
Even though the company is facing some challenges, I’d still buy the stock for my portfolio of UK shares based on its ESG rating. I think the firm’s commitment to change could help attract investors to the stock as we advance.
