2 top ESG stocks to buy in September

Jonathan Smith outlines his preferred top ESG stocks for the coming month, looking closer at GlaxoSmithKline and AVEVA.

| 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.

ESG is a term used to describe the environmental, social and governance position of a business. Companies that score well on that criteria are becoming increasingly popular with investors. Whereas previously it was all about making a profit, the way in which the company makes the profit is arguably just as important. So with that in mind, here are two top ESG stocks that I’m considering for my portfolio in September.

Pushing for diversity

The first company is AVEVA (LSE:AVV). This might come as a slight surprise as an IT software company isn’t the first type of firm that comes to mind when thinking about the top ESG stocks. However, it’s making a push in key areas that really impress me.

For example, it’s pushing for a higher representation of women in the workplace. IT historically has been a male-driven sector, but AVEVA is trying to make a change here. By 2030, it wants 30% of leadership roles and 40% of management roles to be held by women.

Aside from this, the company also indirectly helps ESG pursuits by providing software solutions to better help compute energy efficiency.

In order to be a top ESG stock though, it needs to prove itself from a financial angle too. The share price is up 91% over the past three years, in a steady trend higher. In Q2 of this year, it saw revenue grow by 11%, with growth across all revenue lines.

A risk that I do note is that the company is still bedding in with a new CEO after the shock and sudden departure of previous CEO Craig Hayman at the end of April. He stepped down was for personal reasons, so the change was somewhat quick. Having seen that a change of CEO can make or break a company, I need to see how this situation plays out.

Another top ESG stock

Another company pursuing ESG aims is GlaxoSmithKline (LSE:GSK). The global pharmaceutical giant has shown that it is driven towards making profits, but it also doing well on other fronts. 

For example, each year there is an index published related to access to medicine. It looks at how companies are using research and development and enabling more people and countries to have access to better medicine. In the 2021 index, GSK ranked top, beating several other rivals in the process.

This in itself positions it as a top ESG stock in my eyes. And since the end of 2020, it has also been aiming to have a net zero impact on the climate and net positive impact on nature by 2030. As for this goal, I applaud it but do see this as a potential risk of investing. I feel this is going to be a hard goal to reach. So any underperformance in the years to come could see negative publicity attached to it. This could hamper the share price, even if financial results do well.

As regards performance, the GSK share price is down 7% over the past three years. Yet in the short term, gains of 22% can be seen over the last six months. 

Overall, I think both GSK and AVEVA can be classified as top ESG stocks given the actions taken. I’m considering investing in both in September.

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.

jonathansmith1 has no position in any share mentioned. The Motley Fool UK has recommended GlaxoSmithKline. 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.

More on Investing Articles

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »