Future proofing: Should you invest in a sustainable ASX portfolio?

Environmental, social and governance (ESG) investing considers the sustainability and ethics of companies, but is it a good fit for the ASX?

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There are as many different approaches to investing as there are investors, and no approach is inherently correct. But one approach to investing is gathering quite a buzz lately.

Environmental, social, and governance (ESG) investing considers the sustainability and ethics of companies above other measures. This approach is relatively new and has received praise from some experts and investment firms, but not everyone is a believer.

Who is ESG investing good for?

Those that argue for ESG investing believe it is the best way to future proof your portfolio. Those concerned by climate change, environmental destruction, and social inequality might find investing in companies with sustainable practices eases their minds.

If this sounds like you, you’re not alone. BlackRock surveyed investors all over the globe and found that 54% believe sustainable investing is fundamental to processes and procedures.

Immediate past president of the Myer Foundation Martyn Myer and global head of responsible investment at Mercer Helga Birgden spoke to Motley Fool about their approach to ESG investing on the ASX on Wednesday.

“If you invest with ESG principles in mind in a sophisticated way, you invest with economic and social tailwinds behind your investment instead of headwinds,” said Martyn Myer.

“It means that lots of things you’re investing in are growing far faster than GDP. So, you’re investing in growth, but for a very sound reason.”

Helga Birgden added:

One of the biggest concerns for investors is about what should be in their portfolios in the light of current policy commitments in Australia. We are framed to reduce our pollution by 15% by 2023 if we are to meet the Paris Agreement goal. That’s only 2 years away. And 45% absolute carbon emissions reductions in the next 9 years. For investors that’s pretty significant.

Who shouldn’t take an ESG approach to investing?

Often, a sustainable approach to investing is characterised by long-term gains with little short-term satisfaction.

As UK Firm Newton Investment Management commented in Investment Magazine, those who want a quick, passive gain may not find their needs fulfilled by conventional ESG investing.

To be done right, ESG investing should be an active form of investing with a lot of research and maintenance involved, reasoned Newton Investment Management.

If that doesn’t sound like your cup of tea, there’s no need to worry. You may find that you’re already investing in ESG-focused companies.

In 2019, the Australian Council of Superannuation Investors that 76% of the companies listed on the ASX 200 already report at least a moderate level of meaningful ESG management.

Where to start when looking for ESG investments on the ASX?

There are plenty of companies on the ASX that align with the principles of ESG investing. Here are 3 ASX shares currently focused on sustainability across various industries.

Secos Group Ltd (ASX: SES)

Secos Group is a producer of sustainable packaging materials. It has stockists in 20 countries and a successful contract with Woolworths.

The company has had some incredible gains this year. Currently, its share price has risen by 51% year to date, and by an incredible 362.6% over the last 12 months.

Wide Open Agriculture Ltd (AXS: WOA) 

Wide Open Agriculture Ltd is a regenerative food and farming company aiming to make eco-friendly food products. It’s making gains in the development of an Australia-made plant-based protein from Western Australian lupin.

Wide Open Agriculture’s share price is down 20% year to date but is up by a whopping 400% over the last 12 months.  

Neometals Ltd (ASX: NMT) 

Neometals is a lithium mining company working towards powering electric vehicles and clean energy storage initiatives. It has also partnered with German plant manufacturer SMS group to create Primobius, a lithium-ion battery recycling program.

Neometals’ share price is up 24% year to date and 84.6% over the last 12 months.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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