Three sustainable stocks that are doing well by doing good
Professional investor Peter Michaelis of the Liontrust Sustainable Investment Team picks three stocks to buy that are helping to create a cleaner, safer and healthier society.
For the past 20 years we have been running our Sustainable Future (SF) funds. They are based on the belief that in a fast-changing world the companies likely to survive and thrive are those helping to create a cleaner, safer and healthier society.
We combine negative and positive screening with identifying key structural growth trends that will shape the sustainable global economy of the future. We view the world through three megatrends: better resource efficiency (cleaner), improved health (healthier) and greater safety and resilience (safer) – and then identify 21 themes within these.
Our strategy seeks to generate strong returns while benefiting society by identifying long-term transformative developments such as technological and medical advancements. We focus on well-run companies that capitalise on these changes.
Making money from good work
We also require excellence in environmental, social and governance (ESG), and our holdings will tend to have processes in place to manage customer relationships, employees and supply chains. We have long believed that outperformance on social issues will deliver more resilient businesses over the long term. We bring all this information into our forecast earnings for companies, only selecting those that can make money from their good work.
The shift to personalised medicine
Illumina (Nasdaq: ILMN) is a global leader in gene sequencing and a great example of a company exposed to a powerful trend. Held under our enabling-innovation-in healthcare theme, the company’s ability to read and interpret a patient’s DNA is a core first step in the shift towards more personalised medicines and it continues to lower the cost of gene sequencing over time. Their work is a highly positive development for patients.
Learning Technologies Group (Aim: LTG), which fits into our providing-education theme – part of the improved-health megatrend – boasts a collection of e-learning, compliance, training, human resources software and content brands. The company continues to consolidate the e-learning sector with acquisitions designed to cross-sell to new customers and access new technologies and geographies.
A low-cost investment platform
Avanza Bank Holding (Stockholm: AZA) is an investment platform based in Sweden serving around 1.4 million individuals. By providing a low-cost way for people to manage their savings and investments, it is exposed to our saving-for-the-future theme. The company releases monthly data on new customer numbers, net inflows and trading volumes, and continues to surprise us with its growth and engagement levels of the customer base.
Over our first 20 years of managing the SF funds, our process was successful precisely because it identified companies that have provided something society needs, and this will hold true for the next 20 years and beyond. What 2020 revealed clearly, however, is that the economy and capital markets have to be the servants of society and not the other way around. A sustainable society needs to provide opportunities for everyone and also operate within planetary boundaries in a way that preserves and enhances nature.