Lastest news

Sustainability's hidden investment gems

Jun 13, 2019

The sustainability market is not only for those looking for products to help save the earth and better the lives of the less fortunate but also for those looking into sustainability investments. Craig Bonthron outlines seven companies that are working for their investors as well as the planet and the people on it.

While we can’t single-handedly save the planet, it’s fair to say a lot of us are looking at ways to improve the way we treat the world, and the same can be said for the investment industry. Now, more than ever, there is pressure on investment managers to invest responsibly.

Here is a list of companies who are either leading the sustainable sector or fast-approaching it.

Leaders

Tesla

Tesla’s technical leadership, pace of innovation, scale advantage and the strategic culs-de-sac faced by its competition make it highly likely that Tesla will remain the global leaders in pure electric vehicle production for years to come (it had >80% market share Q4 2018). This was cemented further by the launch of the Tesla Model 3; the first affordable (under €45,000), mass-produced, long-range, electric vehicle available globally.

Shimano

Shimano is the global market share leader of bicycle gears and brakes, and a trusted brand, synonymous with quality and reliability. Decades of focused research and retesting in extreme conditions make this a brand that captures a significant share of the market profits. A recent move into e-Bike drive chains has followed the same pattern, and it is now positioned to offer the best product in this market too.

Illumina

Worth around $40 billion, Illumina are the global share leader in the genetic diagnostic tools or ‘genomics’ market. Whether it is a basic 23andMe ancestry test, a population study, or a highly sophisticated analysis of specific cancer genes, an Illumina machine has likely been used. The cost of genomics is coming down rapidly, and Illumina is the key enabler.

Improvers

Everbridge

Software-as-a-service is a monthly subscription-based business model which is hosted in the ‘cloud’ (like Netflix or Spotify). Everbridge uses the same model, but does something much more important – it saves lives, and money, during and after a crisis. Unlike traditional one-way emergency communications systems, its success is leveraged on a scalable cloud-based notification engine and contact database. Everbridge is the best-in-class global player with the broadest suite of solutions and a long list of blue-chip and government clients.

Insulet

Insulet is a manufacturer of an innovative tubeless ‘pump patch’ called OmniPod – the only product of its type that has been approved by the FDA and European health care systems. The device, made for diabetics, is small, robust and water-proof and replaces multiple daily injections, providing 24-hour delivery of insulin. Insulet has dramatically increased access to this product in recent years by investing in its distribution and manufacturing capacity, while also getting approval across the majority of health care providers and insurers in the US and Europe. I believe that it is in the early stages of its growth and expect profitability to improve meaningfully as the business scales.

Hotel Chocolat

Hotel Chocolat decided to invest heavily in its supply chain (the cocoa growers), while also building out its retail distribution network. By doing so, it has an extremely high-quality source of sustainably grown cocoa and is maintaining the business of the overseas growers, without having to pay away margins to any middle-men.

Green Dot

Green Dot was founded in the late 1990s to serve the unbanked population in the US, and its founder did this with the invention of pre-paid debit cards. Without the incumbent legacy issues associated with traditional bricks and mortar banks, this business built technology capabilities to support store-branded cards for retailers such as Walmart and now supports around 100,000 retail stores in the US. Fast forward 20 years and Green Dot have developed a ‘banking-as-a-service’ platform which enables other banks and partners to distribute its products. Such a platform is not just a robust economic model that serves shareholders, but also dramatically improves financial inclusion and allows those previously excluded from the system to build credit ratings and gain access to the typical financial services the privileged take for granted.


Craig Bonthron is an investment manager of Global Sustainable Equity Fund at Kames Capital.

Past performance is not a guide to future returns. Outcomes, including the payment of income, are not guaranteed.

A version of this article was originally published in The FM Report.