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An unexpected FTSE 100 stock for my ESG investments

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Diggers and trucks in a coal mine
Image source: Getty Images.

Investments based on environmental, social, and governance (ESG) considerations are becoming increasingly popular. A recent survey by mortgage lender Butterfield Mortgages found that 25% of UK investors plan to make ESG investments by 2025.

Wanting to make ESG investments is one thing. But how to start doing it?

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High up on the ESG ratings

A good way to begin is to look at Refinitiv ratings based on ESG scores. However, these can throw up some unexpected results. For example, among the highly rated companies is the FTSE 100 multi-commodity miner Glencore (LSE: GLEN). I know that sounds shocking at first. 

Miners are notorious for environmental pollution. And one of the Glencore’s revenue sources is coal, which is not exactly the cleanest fuel around. In fact, Glencore recently increased its exposure to coal by buying out the shares of fellow FTSE 100 miners BHP and Anglo American in the Cerrejon coal mine in Colombia. 

I reckon that Glencore rates highly on ESG based on its ambitious emission reduction targets. Also, in its update on the mine, Glencore says, “Disposing of fossil fuel assets and making them someone else’s issue is not the solution and it won’t reduce absolute emissions”. There is something to be said for this statement.

Miners get a bad rap for polluting. But the fact remains that all of us as consumers use energy generated from polluting fuel sources. Until these fuel sources are no longer in use, experienced companies that aim to control emissions are best placed to handle them.

Copper gains

There is another reason for me to consider buying the Glencore share. The company is a big copper producer, which is directly related to the economy. As growth picks up over the rest of the year and going into 2020, industrial metal prices are expected to stay strong. This should hold Glencore in good stead. 

Recently, the company has struggled despite the pickup in commodities last year. Its revenue declined and it turned a net loss as the dip during the initial part of the pandemic hit the company hard. Its first-quarter production report for 2021 is mixed too. It shows a pickup in copper production, while some other materials, including coal, lag behind.  

Would I buy the FTSE 100 stock?

I am optimistic, going by the fact that copper accounts for a substantial portion of Glencore’s revenues. Its share price has run up substantially already. I think this is in anticipation of better performance in the future. It has almost doubled in the past year and is at multi-year highs now.  

I think there is potential for it to rise more, especially if the predicted commodity supercycle comes through. I already own Glencore shares, and I will keep an eye out to buy more on dips in the share price. 

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Manika Premsingh owns shares of Glencore. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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