ESG Investing: The Good, The Bad and The Dividends

November 30, 2021

The recent COP 26 UN Climate Change Conference (October 31 to November 12) led to 151 countries submitting new plans to slash carbon emissions by 2030 with the aim to transition to net-zero emissions by 2050.

But environmentalists remain sceptical, arguing that the stringent targets might just push industrialised nations to offset, rather than reduce, their carbon emission. They could do so by purchasing credits associated with the efforts of other countries to reduce emissions.

Unfortunately, the problem of greenwashing runs deep, with Washington Post noting that many nations are “seriously underreporting” their emission levels. One solution to this problem of greenwashing is to hold the corporate sector accountable. Some of the largest US-based companies, such as Amazon, Ford and American Airlines, have outlined transparent plans to become carbon neutral. More will follow suit if investors continue with their focus on ESG investing.

Good vs Bad ESG Companies

Investors shouldn’t have to trade-off strong stock performance and growth for ESG values. Some of the largest companies have been able to balance ethical, social and environmental responsibilities with profitability perfectly. This can be clearly seen in the Woodseer dividend forecasting data, which covers over 32,000 securities, including equities, ADRs and ETFs.

Investors Business Daily (IBD) looked at the Dow Jones ESG data of over 6,000 firms to come up with a list of the 100 best ESG companies for 2021. Tech giants like Microsoft, Nvidia and made it to this list, as did non-tech organisations like Linde, JB Hunt and Gildan Activewear.

“ESG turned a corner this year, with a wide range of companies adapting their practices in positive ways,” said Managing Editor of IBD, Susan Warfel.

Alternatively, we have Royal Dutch Shell, which reported disappointing Q3 earnings. The company has been under pressure to pay high dividends from its fossil fuel division, while working to cut down on its greenhouse emissions, to keep investors happy. Following the lower-than-expected Q3 results, there has been a call from activist hedge Fund, Third Point, for a split-up of the company. The hedge fund holds a large stake in Shell, worth almost $750 million.

Third Point's suggestion comes on the heels of the order from a court in The Hague for the Anglo-Dutch company to accelerate its plans to reduce greenhouse emissions. The hedge fund suggests that Shell’s legacy business could focus on fossil fuels while a separate entity could look at clean energy to “combine modest cash returns with aggressive investment in renewables and carbon reduction technologies.”

Shell, on the other hand, had announced plans to halve emissions under the Scope 1 and Scope 2 categories by the end of the decade. However, its plans don’t include Scope 3, which is responsible for over 90% of the company’s total emissions. This is unlikely to sit well with investors. To appease them, the company has announced plans to set up a biofuel factory in Singapore to meet the 2030 emissions goals.

The corporate world has woken up to the investor appreciation of ESG accountability. More and more companies are likely to build trust through measures that fulfil these values. Regions ESGSource: Refinitiv

5 ESG Companies of note

1.    AstraZeneca (AZN)

AstraZeneca ranks the highest among Big Pharma for fulfilling its ESG commitments. Firstly, its senior management has a high representation of women at 44%. Plus, the company has focused on ESG throughout the pandemic, selling its vaccine at cost. This made the vaccine much more affordable than the Pfizer or Moderna ones, bringing it within reach of developing nations as well.

AZN's dividend yield is expected at 2.9% for 2021. They are a very consistent payer: we are forecasting their next dividend of $1.90 with ex-date of 24th Feb 2022.

2.    GlaxoSmithKline (GSK)

It might not be surprising to have two Big Pharma companies at the top of the list during a pandemic. Glaxo has gone beyond just focusing on coronavirus treatment to achieving the highest rank on the Access to Medicine Index. The company has also committed to achieving net-zero climate impact and net positive impact by 2030. Of course, the dividend yield of 6.4% adds the cherry on the top for this stock. We are projecting a dividend of £0.24 with ex-date of 24th Feb 2022.

3.    British American Tobacco (BATS)

British American Tobacco surprisingly ranked third highest in ESG commitments among the FTSE listed companies for its focus on the environmental impact of its tobacco cultivation and the human rights of its farmers. The company aims to become carbon neutral by 2030 and is upgrading its plants with equipment and renewable energy to achieve this.

While it recorded a dividend yield of 8.7% in 2020, it was in large part due to the volatility in its share price due to declining demand for tobacco products. Our next dividend estimate is £0.555 with ex-div date 24th March 2022.

4.    Glencore (GLEN)

Another surprising entry is mining giant Glencore. It demonstrates its commitment to ESG through transparent executive pay structures, incentivising sustainable success, while focusing on reducing its environmental impact. By aligning lower-level management jobs to an ESG focus, the company believes that it can balance environmental responsibilities with shareholder concerns. It aims to achieve net-zero emissions by 2050. Our next dividend prediction is $0.08 with ex-date 21st April 2022.

5.    Coca Cola HBC (CCH)

This isn't the beverage giant but its bottling plant in Switzerland. Among the top 5 highest-rated ESG companies, CCH has been recognised for its well-rounded approach. The bottler is a major contributor to the parent company's "World Without Waste" initiative and targets 100% recyclable packaging by 2025. It is also working on developing recycling collection systems across several of the regions it operates in.

Although the company was hit hard by the pandemic, it has a projected dividend yields of 2.5%. Our 2022 dividend prediction is €0.678 with ex-date 7th July.


Using Dividend Forecasting for Informed ESG Investing Decisions

Making informed decisions regarding sustainable investments requires the analysis of various datasets, from ESG data to dividend forecast data. This can help with portfolio allocation shifts to ensure optimal returns. With access to a forecast data feed from a vast global list of stocks, financial professionals can arm themselves to make timely decisions for the best possible investment outcomes.

At Woodseer, we offer both dividend projections and also detailed views of historical payouts, disbursements and dates. This feed also includes the currency and amount of each payment and the associated exchange rates. These analytics can be leveraged to identify the most promising investment choices.

To learn how our solutions can help you balance portfolio allocations effectively and in a timely manner, contact us today.