How To Build A Responsible Portfolio

Vodafone Group plc (LON: VOD), HSBC Holdings plc (LON: HSBA), BP plc (LON:BP), Royal Dutch Shell Plc (LON: RDSB) and GlaxoSmithKline plc (LON: GSK) are sustainable companies.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

As Foolish investors saving for the future, we like to make intelligent investments. However, there’s no point saving for the future if our planet is going to be ruined by the companies we invest in.  

We’re not alone. Indeed, over the past few years investors have become increasingly concerned about how ‘sustainable’ their investments are. To help, the Ethical Investment Research Service, or EIRIS for short, has put together a Global Sustainability Rating list.

The ratings list is compiled using fully transparent and consistent data, certified according to external industry quality standards.

The criteria 

Stockpicker-kid-150x150EIRIS compiles its ratings by using a four pillars model. The model takes into account several factors based around corporate sustainability, including environmental, social, governance and other ethical concerns.

What’s more, EIRIS ratings combine the broadest range of environmental, social and governance data, to assess how each company is responding to the various sustainability challenges it faces. 

Of course, EIRIS takes a dim view of companies that sell products which may have health implications, such as alcohol and tobacco. In addition, the organisation takes a cautious view of companies that manufacture products whose inherent nature may be a cause for concern — cluster munitions, for example.

Just to give some idea of how detailed these assessment criteria are, the EIRIS global research platform just introduced an EIRIS Conflict Risk Network. This network provides reliable information on corporations operating within conflict zones.

These ratings are designed to provide a complete picture of corporate sustainability. And to make it all understandable and accessible for every investor, EIRIS compiles the ratings into a simple, clear A-E scale. A is the most sustainable, E the least sustainable. 

The winners 

There are very few companies that are able to meet EIRIS’s strict sustainability criteria. Nevertheless, one of the companies with the highest rating is GlaxoSmithKline (LSE: GSK), the highest of any FTSE 100 company.

EIRIS global research has awarded Glaxo an ‘A’ rating. The high rating means that Glaxo is one of the UK’s most sustainable companies. Indeed, the company’s global contribution to health care, charitable contributions and environmental considerations are all desirable traits for any company taking sustainability seriously.

Vodafone (LSE: VOD), HSBC (LSE: HSBA), BP (LSE: BP) and Royal Dutch Shell (LSE: RDSB) are all rated ‘B’ by the agency, which could come as a surprise to some, especially considering BP’s history. 

However, do a little digging and it becomes clear why Shell and BP have such a high rating. For example, BP is one of the world’s largest renewable energy companies with 16 wind farms across the US and world-leading bio-fuel production facilities within the UK and Brazil.

Moreover, during 2005 BP committed to invest $8bn in sustainable energy projects over the next ten years, at 31 December 2013 BP had invested $8.3bn, beating the company’s own target. 

Meanwhile, Shell is constructing the world’s first carbon capture and storage project. Known as ‘Quest’, it puts Shell at the forefront of carbon reduction efforts, and the project will reduce the company’s carbon footprint by 1m tonnes per year. Quest is likely to be the first of many carbon capture projects funded by Shell. 

HSBC is relatively new entrant to the ‘B club’ for sustainability standards. Nevertheless, the bank is working hard to meet its corporate responsibility to understand and manage the impact it has on society, as well as the environment. The global banking behemoth put a forestry policy in place back in 2004, publishes an annual sustainability report, and invested $117m in community programmes last year.

Where to invest?

With the highest sustainability rating in the FTSE 100, Glaxo seems like the best investment for those looking to invest sustainably.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert owns shares in GlaxoSmithKline. The Motley Fool has recommended shares in GlaxoSmithKline.

More on Investing Articles

Young black colleagues high-fiving each other at work
Investing Articles

Is Legal & General Group one of the FTSE 100’s greatest value shares?

Legal & General shares boast low P/E ratios and massive dividend yields. Could they be one of the London stock…

Read more »

Front view photo of a woman using digital tablet in London
Investing Articles

I’m looking for the best FTSE 100 value stocks to buy now. Have I found them?

Barclays, NatWest, and Imperial Brands shares are recovering strongly. But these FTSE 100 stocks still trade on rock-bottom earnings multiples.

Read more »

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

Where on earth will Nio stock be in 1 year?

Nio stock has demonstrated extraordinary volatility over the past 12 months, but where will it be in a year's time?…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

6.9% dividend yield! 2 cheap stocks to consider for a £1,380 passive income

Looking for a market-beating passive income? These FTSE 100 and FTSE 250 dividend stocks could provide a healthy second income…

Read more »

Mature black couple enjoying shopping together in UK high street
Investing Articles

Potentially 34% undervalued, should I be watching the boohoo share price?

The boohoo share price has seen a rocky few years, but with signs that the economy is improving, could this…

Read more »

Investing Articles

Is the Amazon share price primed for a drop?

The Amazon share price has been on a tear for the last year, but can this trend continue? Gordon Best…

Read more »

Photo of a man going through financial problems
Investing Articles

Down 15% in a week! What’s gone wrong with the National Grid share price?

The National Grid share price isn't supposed to crash but now it has. Harvey Jones is wondering whether to take…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

Taylor Wimpey just paid me £158.78. I’m aiming to turn that into a £100k yearly second income

Harvey Jones says small, regular dividend payments can turn a few pounds into a mighty second income, if he gives…

Read more »