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New Monarch, New Priorities?
Queen Elizabeth has led the United Kingdom for 70 years, and the world will mourn her passing. But not, we face the unknown of new leadership, and this may be a catalyst for the world economy. Thankfully, one transparent way to assess the new leaders priorities is through an important new initiative. Make sure to start researching now, because it will be some time before any financial impact may be established.
The Modern Magna Carta
The Terra Carta, part of the Sustainable Markets Initiative, was created by His Royal Highness Prince Charles, now soon to be crowned His Royal Majesty King Charles, in order to push forward zero carbon agendas in companies around the world. While Queen Elizabeth tended to stay on the sidelines and allow for the government to control these sorts of initiatives, her son may take a different role and providing goals for sustainability is a great place to start.
The Terra Carta focuses on reducing emissions and sustainable development, controversial areas to say the least. However, increased transparency through accreditation of this sort is great to see. 2021 was the first year where companies around the world were recognized for their work cleaning up their historical dirty or unsustainable operations. Some companies are familiar names in the consumer world, who have begun basing their energy demand on renewable energy, while others are the utilities and engineering firms that help create the necessary clean and renewable infrastructure for the future. Take a look at what Prince Charles had to say last year.
In the inaugural class of 2021, 47 companies have earned the official Terra Carta Seal. The worldwide scope of these companies, all publicly traded, offer a way to invest and direct capital towards positive sustainability. Money is power, and if investors support companies like these, there will be incentive for others to do so as well, creating a positive feedback loop towards sustainable development. In this article, I will summarize the list of seal recipients, and point out leaders to consider as an investment.
The Terra Carta Winners
While there are many more companies out there that may be in the process of developing sustainable technologies, I find these recipients to be the leaders in their respective classes, and worthy of consideration over peers. I will discuss this further as necessary when addressing each company individual.
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Acciona (OTCPK:ACXIF)(ANA.MC) – Infrastructure and Renewables Developer – Spain
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Akzo Nobel (OTCQX:AKZOY)(AKZA.AS) – Specialty Chemicals (Paint and Coatings) – Netherlands
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Amazon (AMZN) – E-Commerce and Cloud Infrastructure – United States
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Arçelik Anonim Şirketi (OTCPK:ACKAY) – Household Appliance Manufacturer – Turkey
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AstraZeneca (AZN) – Pharmaceuticals – United Kingdom
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Atlantica Sustainable Infrastructure (AY) – Renewable Energy Developer – United Kingdom
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Banco Santander (SAN) – Global Bank – Spain
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Bank of America (BAC) – Diversified Bank – United States
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Brambles (OTCPK:BXBLY) – Supply Chain Logistics – Australia
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BP (BP) – Energy – United Kingdom
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BT Group (OTCPK:BTGOF)(BT-A.L) – Telecom – United Kingdom
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City Developments Limited (OTCPK:CDEVY) (C09.SI) – Real Estate Development and Operation – Singapore
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Cogeco Communications (OTCPK:CGECF) (CGO.CA) – Telecom – Canada
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Credit Suisse (CS) – Bank – Switzerland
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Cummins (CMI) – Machinery and Truck Manufacturer – United States
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Ericsson (ERIC) – Telecom and IT Equipment – Sweden
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Hewlett Packard Enterprise (HPE) – IT Hardware – United States
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HP (HPQ) – Consumer Tech Hardware – United States
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HSBC (HSBC) – Global Bank – United Kingdom
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Iberdrola (OTCPK:IBDRY) – Renewable Energy – Spain
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IBM (IBM) – Tech Solutions – United States
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INDITEX (OTCPK:IDEXY) – Clothing – Spain
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Johnson Controls International (JCI) – HVAC and Building Solutions – Ireland
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Lloyds (LYG) – Banking – United Kingdom
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L’Oreal (OTCPK:LRLCY) (OR.PA) – Personal Care – France
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McCormick (MKC) – Food & Drink Solutions – United States
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Metso Outotec (OTCPK:OUKPY) (MOCORP.HE) – Mining Equipment – Finland
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National Australia Bank (OTCPK:NABZY) (NAB.AX) – Australia
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Natura & Co (NTCO) – Personal Care – Brazil
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Nordea (OTCPK:NRDBY) (NDA-FI.HE) – Banking – Finland
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Novo Nordisk (NVO) – Pharmaceuticals – Denmark
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Novozymes (OTCPK:NVZMY) (NZYM.CO) – Specialty Chemicals (enzymes and biomaterials) – Denmark
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Orsted (OTCPK:DNNGY) (ORSTED.CO) – Wind Energy – Denmark
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Pepsi (PEP) – Food and Drink – United States
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Prologis (PLD) – Real Estate (logistics) – United States
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Salesforce (CRM) – Application Software – United States
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SAP (SAP) – Application Software – Germany
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Siemens Energy (OTCPK:SMNEY) (ENR-DE) – Renewable Energy – Germany
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Sims Limited (OTCPK:SMSMY) (SGM.ASX) – Recycling – Australia
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Stantec (STN) (STN:CA) – Engineering & Construction – Canada
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Tech Mahindra (TECHM.NS) – IT Solutions – India
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Tesco (OTCQX:TSCDY) (TSCO.L) – Food Retail – United Kingdom
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Trane (TT) – Building Materials & Solutions – Ireland
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TSMC (TSM) – Semiconductors – Taiwan
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Unilever (UL) – Consumer Staples (diversified) – United Kingdom
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Xerox (XRX) – IT Hardware – United States
Who Stands Out?
The list focuses on predominantly multinational corporations with a significant amount of exposure to consumers. Unfortunately, the investment prospects vary significantly, and only a few stand out as good choices.
One positive of the Terra Carta Seal winners is the significant foreign exposure. While I tend to bypass Europe as an area of growth, especially with the Russian Invasion, there are some deals for safety or value investors. In particular, I find that Unilever, Trane, and Novo Nordisk are quality stalwarts in their prospective industries, and temporary economic and share price weakness will soon be a thing of the past.
For those like me who are looking for more serious total returns, I see Metso Outotec as a great play on the revitalization of the formerly harmful mining industry worldwide. Governments around the world are getting stricter, and Metso Outotec’s focus on sustainable and high-quality products is set to benefit for years to come. In particular, look to the battery metal processing and recycling markets as the important drivers of organic growth in the coming years.
Other strong companies, although perhaps overvalued currently, include Stantec, Prologis, and Salesforce thanks to their leadership of their prospective industries and stable financial profiles. I even see PLD and CRM’s performance as superior to Amazon, which is essentially a combination of both companies (logistics meets the cloud).
All the other companies either suffer from macro issues (such as AUM outflows from financials) or growth issues (the fall from grace for IT hardware names HP and Xerox). For the listed telecom providers, I see the listed names as unable to provide significant outperformance merely due to being on this list, and I find that NTT is a viable sustainable alternative that was left out (note the lack of Asian companies on the list).
For the chemical and personal care companies, there are many competitors pushing sustainable products, and names like Ingevity (NGVT) and Ashland (ASH) stand out against Akzo Nobel and the consumer staples. As always, make sure to stay up to date with my analyses, as many comparisons and coverage of the Terra Carta Winners have and will continue to come out.
Final Thoughts
Remember, the Terra Carta is a new accreditation organization and will be updated yearly. As such I would recommend waiting for further data about the sustainability metrics and new Terra Carta Seal winners moving forward. In the meantime, this is a long list to research and I hope you find some interesting potential holdings. Not to mention the political and economic sway King Charles may now influence in the coming years. While I find he may be a stronger voice, perhaps the impacts will be limited.
Let me know if you would like to see more in depth research on any particular name, or the group.
Thanks for reading.
Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.