Ever wondered what sustainable fund managers ACTUALLY invest in? As ever, Good With Money is here to answer!
Our brand new series, Sustainable Stock Selectors, gives you exclusive access to the inside track on leading investment managers’ portfolios, revealing the Good companies boosting returns for investors and contributing to a better world – as well as those that may have not quite lived up to their potential.
In this instalment, David Osfield, manager of the EdenTree Amity International Fund, uncovers three innovative companies tackling some of the world’s biggest problems whilst driving sustainable returns.
David Osfield
Mohawk
- Recycler of plastic waste
The world generates about 3.5 million tonnes of solid waste a day and plastic pollution, in particular, has become a serious threat to the environment. Headquartered in the US, Mohawk Industries designs, manufactures, sources, distributes and markets flooring products designed to reuse this wasteful material.
Mohawk is one of the largest recyclers of PET bottles in the US, turning them into their soft, long-lasting and easy to clean Everstrand® carpets. Around 14,000 plastic bottles become Everstrand® carpet every minute.
A linear economy – one where we take materials and make and dispose of products – is not desirable in a world with a growing population and fast depleting resources. We need to transition to a circular economy, in which business models such as Mohawk’s are capable of reducing waste from the system. What was previously considered waste becomes a resource and an opportunity, and resource efficiency is at the heart of the circular economy model.
Utilising waste as an input reduces dependency on commodity prices, enabling less volatility from a cost perspective through a cycle which should manifest as greater margin stability.
Koninklijke DSM N.V.
- Nutritional additives and sustainable materials
Consumers are increasingly aware of their own food consumption and the methods involved with its production. Netherlands-based Koninklijke DSM N.V. (DSM) is multinational life and materials sciences company.
It targets product solutions that make people, animals and the environment healthier by creating nutritional additives and alternative sustainable materials.
Its innovative pipeline of solutions include feed additive ‘Dyneema’ that reduces methane production in cattle by nearly a third, a fibre 14 times stronger than steel, and resin which produces lower Volatile Organic Compounds, or air pollutants, than traditional coating materials.
The company benefits from the rise of sustainable and environmental promoting policies. Moreover, as a global operator, DSM benefits from scale and positioning across the ingredients chain and as such offers competitive pricing. Despite operating in highly competitive markets, DSM is the market leader in most segments, including nutritional ingredients, bio-ingredients for food and beverage, coatings and high-strength fibres.
Trimble
- Improving crop yields and minimising water use
The World Bank estimates that to avoid the spread of hunger, agricultural output needs to increase by 50 per cent by 2050 to feed nine billion people. Meanwhile, land available for food production is depleting by approximately 10 million hectares per year. In order to address this challenge, while also minimising its impact on climate change, the agricultural industry needs to innovate.
This is beginning to happen through companies like Trimble, which is harnessing technology such as big-data analytics, artificial intelligence and automation to improve crop yields and minimise water usage on farmland.
Trimble provides integrated software solutions that increase safety, operational efficiency, asset productivity and regulatory compliance for companies in the construction, engineering, agricultural and transport industries. These remain some of the least digitalised industries.
Trimble’s scale and scope is almost unrivalled by a fragmented list of competitors. Moreover, the company is pursuing a $50 billion (£40.6 million) total addressable market relative to $2.7 billion (£2.2 billion) in annual sales in 2017, illustrating there is still plenty of room for growth.
Positive change
Humanity has many challenges to overcome if future generations are to inherit a healthy planet. However dynamic companies like these are taking a leading role in developing solutions to the problems plaguing our planet. This is creating opportunities for responsible investors to unearth unique companies that are generating strong returns whilst simultaneously affecting positive change.
