The global pandemic has eclipsed the urgency 2019 brought to dealing with the climate change crisis. But the issue is still here, and investors shouldn’t forget its significance. Climate change is already causing economic damage and, in coming years, this is likely to get worse. As sovereign wealth funds, pension funds, and retail investors look for ways to keep their investments in line with ethical values and sustainability, ESG (Environmental, Social and Corporate Governance) investing has been gaining ground. Two companies considered sustainable investments that I like the look of are Halma (LSE:HLMA) and Croda (LSE:CRDA).
Sustainable investments
FTSE 100 safety group Halma manufactures a range of protection products for hazardous situations. It has a strong focus on Health, Safety and Environment, through worker protection, responding to rising healthcare demand and improving food and water quality. To each of these problems it offers a range of product solutions such as water quality instruments, fire and gas detectors and high-power industrial resistors.
Halma’s share price has soared 30% in a year and is up 47% since the March stock market crash. Confidence in this company and its sustainable future has raised its price-to-earnings ratio to over 50 and earnings per share are 48p. Demand for its products has remained resilient from the USA and most of Europe, but the UK and Asia Pacific have been challenging. Unfortunately, Halma expects adjusted pre-tax profits for 2021 to fall 5 to 10% lower. Nevertheless, orders are still coming in and Halma has been implementing cost-control measures to protect profit and continue generating cash.
Halma is considered a sustainable company because it offers solutions to ensuring clean water and infrastructure safety. It’s also helping tackle the worldwide problem of preventable blindness. Looking ahead, Halma confirmed its financial position remains robust, and it’s looking for acquisition opportunities to continue expansion. I think this looks a resilient company with a solid future ahead. It offers a small dividend yield (less than 1%) and the likelihood of continued growth. For these reasons, I think it’s a good addition to a long-term investor’s portfolio.
Speciality Chemicals
Croda International is a chemical and technology company found in some top sustainable investment funds. The 95-year-old business and FTSE 100 constituent makes speciality chemicals for some of the biggest brands in the world. Its solutions are essential to products found in health and beauty, engine lubricants and plastics. Earlier this month it announced a new partnership with Sentient Scienc which will use Croda’s Rewitec additives in wind turbine gearboxes and bearings. As the world looks to rapidly move to wind and solar energy, it’s vital that the parts have longevity and Croda’s chemicals can help ensure that.
The Croda share price is up 36% in a year and over 55% since the March market crash. Its price-to-earnings ratio is 36, and earnings per share are £1.72, while its dividend yield is 1.4%. The pandemic has reduced sales to the skincare and cosmetics industry for the group, but despite some challenges, it remains confident in its cash generation abilities and strong balance sheet. The STOXX Europe Sustainability Index contains both Halma and Croda, and they’ve both seen their share prices come screaming back from the March market crash. Therefore, I consider them two of the best sustainable investments of 2020.
