The ESG Opportunity : “Built to Last” Companies

by | Aug 3, 2021 | Process Papers

“The opportunity to create economic value through creating sustainable, societal value will be one of the most powerful forces driving growth in the global economy.”  Michael Porter

 

The ESG industry has grown and changed – we believe that it has moved from a “negative screening” to a more positive approach that favors good companies that can even improve society through shareholder advocacy and lobbying.

We know that sustainability is paramount to investing. Sustainability risks and opportunities are not a separate category of factors to be assessed, in our view. Rather, sustainability challenges are part of the reality in which we all live and operate. As investors, we must find the companies who understand these challenges and opportunities and continue to adapt to these realities to pursue long-term profitability.

And that’s why we use ESG as an arrow in our quiver when we fundamentally analyze a company. It helps us reduce risk in our portfolio – you win by losing less and understanding the ESG makeup of a company can help us avoid large blow ups. For example, ESG does a great job mitigating bankruptcies – 15 out of 17 (90%) bankruptcies in the S&P 500 between 2005 and 2015 were of companies with poor Environmental and Social scores five years prior to the bankruptcies.

Furthermore, we’ve started to not just focus on companies that have, from what we believe, healthy ESG characteristics, but those that have been improving their ESG footprint. This can work as long as the multiple paid for “good” ESG stocks are not excessive and as long as the investor has high conviction that an ESG laggard is on the path to improvement. Energy stocks are a prime example of an industry that has started to revolutionize, holistically, their standpoint on ESG.

 

Read the entire paper here

 

Disclosures

Past performance is not indicative of future results. This material is not financial advice or an offer to sell any product. The
information contained herein should not be considered a recommendation to purchase or sell any particular security. Forward
looking statements cannot be guaranteed.

This commentary offers generalized research, not personalized investment advice. It is for informational purposes only and
does not constitute a complete description of our investment services or performance. Nothing in this commentary should be
interpreted to state or imply that past results are an indication of future investment returns. All investments involve risk and
unless otherwise stated, are not guaranteed. Be sure to consult with an investment & tax professional before implementing any
investment strategy. Investing involves risk. Principal loss is possible.

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and Exchange Commission. Registration does not imply a certain level or skill or training. More information about the advisor,
its investment strategies and objectives, is included in the firm’s Form ADV Part 2, which can be obtained, at no charge, by
calling (251) 517-7198. Aptus Capital Advisors, LLC is headquartered in Fairhope, Alabama. ACA-2107-20.

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