SLI’s Duncan: Mainstream stocks that suit an ethical portfolio

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Mainstream companies from across markets, sectors and countries can contribute to an ethical portfolio. To mark Good Money Week, five are listed below that have the potential to not only make money but also make a positive difference to the world.

Mondi

Mondi is a UK-listed international integrated paper and packaging company which has exposure across the whole value chain from managing forests and producing pulp, paper and compound plastics to developing effective and innovative industrial and consumer packaging solutions.   The paper and packaging industry faces many global challenges around ongoing climate change, biodiversity loss, deforestation and degradation of land and freshwater ecosystems and resource scarcity. These global megatrends and international collective action is increasingly calling for Mondi to drive sustainability and transparency across its business.   Despite these many challenges Mondi delivered profit growth of 24 per cent in 2015. The key driver of Mondi’s profit growth in 2015 was attributable to the return from self-help capex initiatives. Many of these initiatives and much of the return is directly attributable to lowering energy requirements and gaining green energy credits.

Glanbia

Glanbia is an Irish dairy processing company which has transformed itself into a world leading manufacturer of performance protein nutrition products. Glanbia’s product range spans from protein powders targeting athletes and committed gym-goers, to protein drinks and bars for more conventional mass market consumers. The company’s ingredients business helps other Food & Beverages companies improve the functional and health benefits of their products. Glanbia commands a strong market position in these segments, is growing substantially above market.

Consumers are increasingly aware of the health and nutrition aspects of the food and beverages they consume, and protein-rich nutrition is increasingly viewed as a healthier choice. Glanbia in its branded nutrition division meets this growing consumer need, and its ingredients business helps other companies develop such products.

LafargeHolcim (LH)

LafargeHolcim (LH) is one of the world’s largest providers of building materials and has operation in over 90 countries. The result of a recent merger between Lafarge and Holcim, LH is a leader in the field of sustainability products and reporting practices and operations. Its products put the company in a strong portion to benefit from the transition to a low carbon economy. Currently, 7 per cent of its revenue is from ‘enhanced sustainability products’, which it seeks to grow to 20 per cent by 2025 and 33 per cent by 2030. It is well placed to meet demand if there is increased regulatory pressure on construction in developed market and/or a commercial appetite for carbon/environmentally friendly products. Its own operations are also well positioned to manage regulatory pressure.

Its reporting standards are an example of best practice, not just in its own sector but across all sectors. Developments such as its pre-cast concrete that reduces end-to-end CO2 by around 70 per cent, uses almost no water and is CO2 cured offers an example of the positive steps it is taking. Concerns remain regarding health & safety standards; however, we believe that the company is taking positive steps across all areas of its sustainability programme.

Polypipe

Doncaster-based Polypipe Group is the UK’s largest manufacturer of plastic piping systems. The company is changing the construction of residential and commercial buildings by providing sustainable technology and solutions to encourage low or zero carbon technology and managing water as a precious resource.  Polypipe will produce pipes and fitting using recycled raw materials and all their products are 100 per cent recyclable at the end of their useful life. Plastic pipes typically weigh 94 per cent less than their concrete equivalent and as well as requiring less time, labour and heavy plant on-site, Polypipe’s products can be transported more easily and efficiently. Polypipe is perfectly positioned to take advantage of the move towards low energy, zero carbon homes and buildings with Polypipe being able to provide carbon efficient solutions aimed directly at the reduction of CO2 emissions and reduction of energy usage.     Since its flotation in 2014 Polypipe has delivered an impressive track record delivering 30 per cent growth in its operating profit as it takes advantage of these industry trends.

Bellway

Bellway is a major UK residential property developer and FTSE 250 company. As one of the UK’s largest housebuilders, Bellway plays an important role in addressing the growing national housing shortage whilst delivering returns to shareholders in a way which protects and enhances the environment and the economy.     As environmental regulation in the sector increases Bellway ensures that its housing developments create sustainable new communities and the local environments are enhanced.   Bellway will work closely with local authorities to provide information on sustainable transport links and will provide detailed environmental impact assessments and habitat surveys to ensure they build with due regard to the local environment.   With the focus on energy efficiency within the construction industry, Bellway will design new sites to achieve an average energy efficiency of at least 5 per cent better than the applicable building regulation standards.   Bellway has many different stakeholders to balance when its constructs a new home but still has managed to deliver impressive financial returns growing its profits 40.6 per cent to 31 July 2016.

Lesley Duncan runs the Standard Life Investments UK Ethical Fund.