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Top 4 ESG Stocks to Add to Your Watchlist

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2021 saw record inflows from ESG funds and companies around the world.

The COVID-19 crisis accelerated the trend towards a more sustainable approach to investing.

Policymakers and investors saw the crisis as a wake-up call as parallels were drawn between the unpredictable risks of a pandemic and issues such as climate change.

As a result, 2021 saw record-breaking inflows into ESG funds and companies around the world.

What is ESG?

ESG is an acronym for Environmental, Social and Governance. The term is used to describe a set of standards that evaluate a firm’s collective conscientiousness to social and environmental factors.

ESG companies not only care about their profits and finances but also care about people and the environment by focusing on sustainable development.

The ESG trend has already gained momentum in India, with companies choosing to act with greater social and environmental responsibility.

Here are five companies that are growing.

#1 Nestle India

The first ESG stock in our list is Nestle India.

The Indian FMCG company works closely with farmers and local communities to enhance the quality of life and economy of the areas they operate in.

The company has helped create facilities for drinking water and toilets in the Moga factory milk district. It also gives loans to the farmers.

Apart from this, it also focuses on sustainability.

From 2005 to 2020, for every tonne produced, Nestle reduced energy use by about 48%, water use by about 52%, wastewater production by about 5%, and specific direct GHGs (green-house gas). ) reduced emissions. From 53%.

Its major renewable energy projects also contributed to GHG savings. This was implemented through the purchase of solar power at the Choladi factory and the use of green fuel for hot air production.

In addition, the company has set an ambitious target of recycling or reusing all of its packaging by 2025.

With regard to CSR (Corporate Social Responsibility), Nestle India spent Rs 464 million in the financial year 2021.

Its CSR programs were conducted with a focus on increasing nutrition, health and health awareness among adolescents. It also implemented projects to develop community support for citizens.

During the pandemic, the company partnered with the National Association of Street Vendors of India (NASVI).

Through the partnership, it developed programs to train street food vendors on food safety, hygiene, COVID-19 precautionary measures and digital payments.

In its latest quarterly results, Nestle reported a 9.6% year-on-year growth in revenue to Rs 3,860 crore on the back of price increases across categories. Net profit grew 5.2% YoY to Rs 620 crore during the quarter.

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#2 P&G Sanitation and Health Care

Next on our list is ESG stock P&G Hygiene.

FMCG company also follows various socially responsible and environmentally sustainable practices.

Its manufacturing plant in Goa is a ‘Zero Waste to Landfill’ site, meaning there is no manufacturing discharge into the environment.

The plant also leverages technology, experts, staff and renewable sources of energy to reduce its overall carbon footprint and improve energy and water efficiency.

As a result, over the past 10 years, it has reduced its carbon emissions by 90% and energy consumption by 30%.

P&G is also committed to helping reduce the flow of plastics by making a difference now and bringing long-term solutions. It has established a system to recover and recycle multi-layered plastic packaging waste. It is also working with various waste management companies and industry to collect, segregate and recycle multi-layered plastic packaging waste.

P&G has established an ‘Environmental Sustainability Fund’ to collaborate with external partners to offer environmentally sustainable business solutions.

In the year 2021, P&G spent Rs 288 million on CSR activities. Its CSR strategy is supported by three pillars – P&G Education, P&G Suraksha India and Timely Disaster Relief.

P&G Education provides access to holistic education for underprivileged children while P&G Suraksha India provides comfort to those affected by natural calamities.

During the pandemic, the company supported communities through the donation of masks and sanitizers manufactured in-house to combat the spread of the virus through its COVID-19 response and relief program.

In its latest quarterly results, P&G Hygiene reported marginal growth of Rs 1,060 crore in revenue on account of higher base. Net profit fell 14% YoY to Rs 220 crore on account of commodity cost inflation.

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#3 Colgate-Palmolive India

Colgate-Palmolive India is the third ESG stock in our list.

The personal care products company is engaged in a variety of social activities which are carried out through effective partnership with reputed NGOs and agencies.

It has partnered with NGOs such as Sewa Mandir and Water for the People to provide access to drinking water in states such as Maharashtra, Bihar, West Bengal and Rajasthan.

In the field of education, its scholarship program provides foundational support through scholarships and counseling to deserving candidates.

Colgate-Palmolive spent Rs 21 crore on CSR activities in the financial year 2021.

In addition, water conservation remains a major priority for the company. The company’s manufacturing plants and offices are focused on recycling and reusing water.

It also takes sustainability and energy-saving initiatives at its manufacturing sites.

In August 2021, Colgate became the first mass-market brand to launch recyclable toothpaste tubes in India.

In partnership with EPL (formerly Essel Propack), the company has started manufacturing recyclable tubes for Colgate Vedashakti Toothpaste and Colgate Active Salt portfolio.

The transition to recycling across the company’s product portfolio will take time to complete, keeping the company’s vendors and consumers in mind. It will be completed by 2025.

Sub-brands are already taking the necessary steps to become sustainable. Ultimately, the company aims to make the entire portfolio sustainable.

For the September 2021 quarter, Colgate reported 46.8% YoY growth in revenue. The company’s net profit also more than doubled during the quarter.

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#4 Page Industry

Fourth on our list is the ESG stock Page Industries.

The company is the exclusive licensee of international innerwear brand Jockey in India and is the market leader in the innerwear category. It is also the exclusive licensee of the Speedo brand in India.

Page Industries has strived to inculcate a sustainability culture in all aspects of its business.

Some of its initiatives include Restricted Substances List (RSL) policy, access to safe water, sanitation and hygiene and its packaging as well as 100% recycling of production waste.

The company also takes steps to conserve water and energy along the value chain. Page Industries spent Rs 6.26 crore on CSR activities in the financial year 2021.

The company partnered with NGOs to help uplift the underprivileged communities in the fields of education and healthcare.

Through the Accessible Education programme, the company has provided quality education and vocational skills in and around government schools.

Educational support and career guidance were also provided.

The company’s Viva program provided health education, awareness and support to children with medical issues, while Jockeys Fit Children (JFC) enhanced children’s health and physical fitness.

During the pandemic, Page Industries sponsored medicines, oxygen concentrators and more than 100,000 masks to government hospitals and government officials.
Provided awareness about do’s and don’ts for COVID-19 and COVID related safety and distributed face masks free of cost to the public.

In its latest quarterly results, Page Industries reported a 46.4% year-on-year increase in revenue as sales grew across all product categories due to expansion in the company’s portfolio and existing network.

Net profit grew 44.8% year-on-year.

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Snapshot of ESG Shares from Equitymaster’s Stock Screener

Here is a quick look at the above mentioned companies based on some important financial parameters

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Please note that these parameters are subject to change as per your selection criteria.

Why you should invest in ESG stocks

Studies have shown that companies that rank higher on the ESG scale experience a lower cost of capital than other companies with lower scores.

They are also able to minimize external issues and consequently reduce business risk. This means better profits and hence better returns for the investors.

While the above reasons are compelling, one should approach ESG stocks with as much caution as other stocks.

ESG stocks can be prone to greenwashing and the lack of globally accepted standards for ESG metrics is also a problem.

Note that the above stock profile only mentions the various social and environmental initiatives taken by these companies.

However, one must also look at the governance. Good corporate governance helps in creating an environment of trust, transparency and accountability.

These are important factors for promoting long term investments.

If you are planning to invest in any ESG stock, assess the fundamentals and prospects of the business. Continued research should not be compromised despite positive odds.

Disclaimer: This article is for informational purposes only. This is not a stock recommendation and should not be treated as such.

(This article is syndicated from Equitymaster.com)

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