CORRECTION: This article originally stated that Harworth shares gives the company a valuation that is a little over its market capitalisation. This has been changed to correctly reflect that the valuation is a little over its NAV.
It used to be the case that ethical investing was simply a matter of avoiding companies that did the most harm, such as tobacco and oil companies. But increasing awareness about a wide array of issues now means there is a greater emphasis on investing in companies that actually do good, from an environmental, social, and/or ethical perspective.
With the new breed of ethical investor in mind, I’ve found three investments that produce significant benefits to society and shareholders alike.
Urban regeneration
Harworth Group (LSE: HWG) is involved in the transformation of former industrial and brownfield sites into new housing and business parks. Focused on the north of England, the group typically acquires unused waste land and turns it – through detailed planning and remediation – into new communities with housing, shops, restaurants, bars, parks, and social facilities.
As well as selling off engineered land with planning permission to housebuilders, the group also builds and manages its own business parks.
The most notable of these are the Advanced Manufacturing Park in Yorkshire and the Logistics North site in Bolton, which are home to the likes of Rolls Royce, McLaren, and Amazon. More than 5,000 people are employed on these sites, and they are an important source of prosperity for the local economies.
Impressively, Howarth has managed to do all of this profitably, and has increased its revenues from £13m in 2015, to £78m in 2018. Over the same period, the group’s net assets increased by almost 50%. The shares trade at around 14 times last year’s earnings, giving the company a valuation that is a little over its net asset value. To my mind this looks like good value.
Solar power
NextEnergy Solar Fund (LSE: NESF) is a listed investment fund that invests in a portfolio of solar (photovoltaic) power assets. The fund’s investments are mainly in the UK and Italy, and at last count comprised 89 separate solar power installations.
In the first half of the year, these installations produced enough energy to power 134,000 homes for six months, effectively displacing 131,000 tonnes of CO2. This is the equivalent amount of CO2 involved in the non-renewable production of the same amount of energy.
The fund provides an attractive dividend yield of over 5%, which it aims to increase in line with inflation, and has provided annualised total returns of 10% since listing in 2014. The shares are valued at a slight premium to the fund’s net assets, but considering its recent growth record, I think this is a perfectly reasonable price to pay.
Wind power
Greencoat UK Wind (LSE: UKW) is an investment fund that invests in UK-based wind farms. The fund has 35 wind farms after adding five in 2019 alone, and is committed to further expansion.
Last year, the fund’s farms generated more than 1,000 GWh of electricity, leaving the fund well placed in an industry that is estimated to be worth £75bn by 2021.
Net assets have more than doubled to over £1bn in the three years to 2018, pushing the share price up by more than 14% last year. There is also a 4.5% dividend yield, which looks fairly sustainable to me.
I think these shares are ideal for those of us that want to see our investments impact society in a positive way. Not only do these investments achieve that, but I reckon they should also produce pretty good shareholder returns too.
