There are plenty of FTSE 100 and 250 shares that wouldn’t be out of place in a sustainable investing portfolio. I’ve picked three green stocks from these indexes that I think a ‘sustainable’ investor should take a look at. All of these companies have been awarded the London Stock Exchange‘s Green Economy Mark. That means they derive at least 50% of their revenues from products and services that contribute to the global green economy.
A green FTSE 100 stock
Johnson Matthey (LSE: JMAT) released the world’s first emission control catalyst for car exhaust systems in 1974. In the future, however, car engines aren’t expected to spew fumes at all. But fear not, as Johnson Matthey has ultra-high-density cathodes for batteries that power hybrids and fully electric vehicles. It’s also commercialising a process for producing low-carbon hydrogen and has a range of fuel cells in production already.
Johnson Matthey shares trade 17% lower than they did a year ago. The coronavirus market crash didn’t help, and nor did the 50% dividend cut, which was made to shore up finances during the pandemic. The company responded by accelerating a restructuring plan that aims to reduce costs after 2023. The next few years could be rough. But in the long term, this FTSE 100 share might make an excellent addition to a sustainable investing portfolio, I feel.
A sustainable FTSE 250 stock
Think of the all the tanks, pumps, lines and pipes that store and shuttle brake fluid, fuel and coolants around a car. Well, TI Fluid Systems manufactures all those at hundreds of sites in nearly 30 different countries around the world. TI focuses on fuel efficiency and reduced emissions for parts that find their way into internal combustion-engined cars and hybrid vehicles. But recognising that the next big trend is towards fully electric vehicles, it has been focusing increasingly on thermal products and solutions for the batteries that power them.
TI shares are currently trading for a little over seven times earnings per share. That could suggest they are cheap right now. Furthermore, 67% of the analysts covering the company recommend buying shares in TI: none of them rates the stock as a sell. I feel that TI shares might have a lot to offer in the long term as part of a sustainable portfolio of green stocks.
Waste not, want not
Finally, we have Biffa, which makes a living out the 15,000 tons of rubbish that 2.2 million households and 76,000 business pay it to take away every day. In days gone by, it would have all headed to landfill or incineration. Now it’s recycled or used to produce energy when that’s not possible. It looks like Biffa is positioned well to benefit from demand for more recycling and repurposing waste in the future. It’s also doing all it can to carry out its activities with as little environmental damage as possible. Carbon dioxide emissions at Biffa have fallen 65% since 2002. Introducing electric collection vehicles should help reduce them by another 50% in a decade.
There’s increasing awareness of the impact of investment decisions on the environment. Sustainability-focused funds are appearing, and existing ones are paying more attention to the green credentials of their holdings. Green FTSE 100 and 250 stocks, like Biffa, TI Fluid Systems and Johnson Matthey, should benefit from these trends.
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James J. McCombie owns shares of Johnson Matthey. 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.