Responsible investing is a phenomenon that goes by many names. Some know it as ethical investing. Others give it the more convoluted title of Environmental, Social and Governance (ESG) investing. It’s a share-buying strategy that more and more people are adopting as consumers become more conscious about how the products and services they buy come into being.
I own a number of ESG stocks. Biffa and TI Fluid Systems even sit on the London Stock Exchange’s Green Economy Mark list. Companies and funds that meet this criteria “derive more than 50% of their revenues from products and services that are contributing the environmental objectives such as climate change mitigation and adaptation, waste and pollution reduction, and the circular economy.”
Investors don’t need to settle for lower future returns by buying ESG stocks either. I certainly expect the stocks I mentioned above to make me decent long-term profits as the recycling industry grows (in the case of Biffa) and electric vehicle sales take off (TI Fluid Systems).
Here are two other top-quality ESG stocks I think could make me lots of money. I even think billionaire investor Warren Buffett would approve of them!
An ESG stock I also own
DS Smith (LSE: SMDS) is another stock on the Green Economy Mark list I currently own. It recycles paper back into boxes and other packaging products. And it collects the corrugated packaging once it’s been used, significantly reducing waste in the process. It’s also sold off all its plastics-manufacturing assets and has plans to become carbon Net Zero by 2050. I think this FTSE 100 company could make me terrific returns as e-commerce grows rapidly.
Now DS Smith faces a problem in the form of soaring paper costs. But I think Buffett would like this UK share because its colossal manufacturing and distribution network gives it economies of scale that helps it beat many of its rivals on cost. The business is in the process of building two new packaging plants in Italy and Poland to keep growing its global footprint.
A penny stock Warren Buffett might love
I think Nanoco Group’s (LSE: NANO) another stock Buffett would really like. In this case its long-term competitive advantage — or economic moat as he would say — is that it has a considerable portfolio of around 700 patents in the field of quantum dots. Incidentally, the company’s currently litigating against Samsung over alleged patent infringement.
One risk here is that litigation’s a long and expensive process. This has the capability to stretch penny stock Nanoco’s balance sheet to the limit and hit investment in other parts of the company.
But I still think this ESG stock could be a great long-term buy as its nano-materials are becoming increasingly popular in the manufacture of displays, electronic products and lighting. Nanoco’s products contain no toxic heavy metals and can help improve energy efficiency, hence its Green Economy Mark status.