4 Stocks To Consider For Your ESG Portfolio

2021-01-12     thesmartinvestor
4 Stocks To Consider For Your ESG Portfolio

In the past, the notion of sustainable investing was merely an afterthought for many investors.

But that mindset is starting to change after the COVID-19 pandemic forced unprecedented lockdowns around the world.

Reduced business activity led to decreased pollution levels and improvements in air quality, resulting in increased attention on environmental issues and sustainable financing.

ESG (environmental, social, governance) funds attracted a record inflow of capital in 2020, with this trend set to continue in 2021.

For investors who want to do good while generating a return with their cash, here are four companies with excellent ESG ratings to consider.

Oversea-Chinese Banking Corp Limited (SGX: O39)

A familiar name to Singaporeans, OCBC Bank is one of the three main banks in Singapore, and the second-largest component of the Straits Times Index (SGX: ^STI).

OCBC is rated “AA” by MSCI’s (NYSE: MSCI) ESG rating system, the second-highest achievable rating.

In its coverage of OCBC, MSCI considers the bank an ESG leader in the areas of corporate governance, privacy and data security, and financing environmental impact.

In 2018, OCBC implemented a five-pronged sustainability framework to highlight its ESG priorities.

Some of its vast range of ESG-friendly policies include not providing new financing for coal-fired power plants and thermal coal mines.

The bank also conducts an ESG Risk Assessment in its credit evaluation process, where clients with high ESG risks must agree to an action plan to address the risks.

OCBC is also one of the leaders in providing sustainable financing.

In 2020, the bank surpassed its goal of growing its sustainable finance portfolio to S$10 billion, two years ahead of schedule.

With growing demand for sustainability-linked loans, the bank has bolstered its new goal to reach S$25 billion by 2025.

CapitaLand Integrated Commercial Trust (SGX: C38U)

CapitaLand Integrated Commercial Trust, or CICT, is one of the largest REITs in Asia.

The REIT was formed following a merger between CapitaLand Mall Trust and CapitaLand Commercial Trust in November 2020.

CICT owns and manages a mixture of office and retail properties, as well as integrated developments such as Raffles City, Plaza Singapura and Funan.

The REIT has been consistently rated “AA” by MSCI’s ESG standards, designating it as a leader in the real estate industry.

CICT was among one of the first companies in Singapore to start publishing annual sustainability reports, and has won a multitude of sustainability and green building awards.

In its latest sustainability report, the REIT reported a 29.4% reduction in carbon emissions intensity since 2008.

Energy and water consumption were also reduced by 19.2% and 22.4% respectively.

CICT’s sponsor, CapitaLand Limited (SGX: C31), was also listed in the Global 100 Most Sustainable Corporations in the World 2020.

City Developments Limited (SGX: C09)

City Developments Limited, or CityDev, is a leading real estate developer and manager.

The company owns over 24 million square feet of gross floor area in residential, commercial and hospitality properties globally.

CityDev has maintained a “AAA” rating over the past five years, the highest rating on MSCI’s ESG rating scale.

The real estate developer is recognized as a global leader in sustainability benchmarks and has been a member of the Dow Jones Sustainability Indices since 2011.

In 2020, CityDev unveiled its CDL Future Value 2030 blueprint, a set of sustainability goals it plans to achieve by 2030.

Some targets include reducing water and energy usage, maintaining 100% tenant participation in its Green Lease Partnership Programme, and doubling resources to advocate sustainability practices.

When the COVID-19 pandemic struck, CityDev made a S$400,000 donation to social service agencies in Singapore, and offered discounted accommodation to stranded workers in its Singapore hotel properties.

Keppel Corporation Limited (SGX: BN4)

Keppel Corp is a conglomerate that engineers solutions for sustainable urbanisation, focusing on energy, urban development, connectivity and asset management.

Keppel is the only other company on the SGX to have the maximum “AAA” rating apart from CityDev.

Its lofty ranking should be no surprise as Keppel’s ecosystem of companies works together to build solutions to combat climate change.

On top of achieving success in sustainability benchmarks, the company also contributes significantly to societal causes.

The company invested S$9.6 million in social causes in 2019, while volunteers from Keppel spent over 18,000 hours in community service work.

Keppel employees are given two days of paid volunteerism leave annually to encourage them to participate in community outreach activities.

As part of Keppel’s Vision 2030 roadmap, the company identified climate action as a new material ESG issue it plans to focus on.

The company set new long term targets for reducing waste and water consumption and included environmental sustainability into the performance appraisal of senior management.

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Disclosure: Herman Ng owns shares of CapitaLand Integrated Commercial Trust.

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