Three UK stocks to invest in for a better world
- 27 January 2022 (5 min read)
As the world seeks to address its climate, demographic and social challenges, UK investors have an important opportunity to assess how to best contribute to these efforts.
It is our belief that the optimal approach is to find durable businesses through our proprietary qualitative ESG analysis. This analysis places importance on companies having a positive impact on all their key stakeholders - including being aware of their environmental obligations.
By identifying companies exposed to secular opportunities and with strong or improving responsible practices, investors can potentially enjoy attractive returns while encouraging businesses to be a force for good.
The AXA Framlington UK Sustainable Equity Fund aims to invest in UK companies that balance the needs of future generations without compromising on growth. Below are three companies we hold that are exposed to the sustainable growth themes which define our approach: People, Planet and Progress.
Treatt (People theme)
Treatt is an innovative yet long established company that produces natural extracts, flavour and fragrance ingredients for global fast-moving consumer goods (FMCG) companies. Natural extracts are a speciality for Treatt whereas the industry leaders are typically focused on chemically processed flavours. This a very strong trend as increasingly empowered, health-conscious consumers demand greater transparency of ingredients used in food and beverages.
Growth is also coming from the increasing desire for consumers to choose meat-free products, which tend to lack the flavours and aromas of meat-based products – this could provide a material opportunity for Treatt given its expertise in natural flavouring and fragrance.
Through our rigorous qualitative analysis we can see that Treatt’s supply chain practices are progressive and it also has a good health and safety culture with high levels of training and a low incidence rate. It has a strong corporate culture, good female participation in leadership roles and 73% of permanent Group staff are shareholders.
Auction Technology Group (Progress theme)
ATG provides digital marketplace technology that connects bidders from around the world to auctioneers. It provides a level playing field by giving regional auction houses the digital tools to compete in a very fragmented industry. It allows auctioneers to do what they enjoy – finding product, valuing it and building customer relationships.
The global growth opportunities for ATG are very exciting. The auction industry is huge and has not yet shifted online. There is no reason to believe why 75% of this industry could not be online in the next 10 years. ATG’s technology enables the auction house to make the selling process more efficient and enables the highest value per bid. Marketplaces often provide ‘winner takes all’ economics so the bigger ATG scales the harder a new entrant would find it given their domain authority.
ATG is doing everything auctioneers don’t like to do, and it allows both to grow. Auctions are a part of the world no one thinks about but they are a meaningful player in the circular economy - everything they do reduces waste and makes the world more efficient.
DiscoverIE (Planet theme)
DiscoverIE is a manufacturer and distributor of customised electronic components. Core to its value proposition is the understanding and solving of its customers’ design challenges, which helps it create recurring revenue streams. Its four target markets - renewable energy, transportation, medical, and industrial and connectivity – are long-term international growth markets driven by excellent fundamentals such as decarbonisation, autonomous vehicles, and ageing affluent populations.
We like its laser focus on its target markets which should allow it to organically grow well ahead of GDP over the economic cycle.
DiscoverIE has set a 50% carbon emissions reduction target by 2025 and is making good progress to achieve this through efficiency savings, installation and purchase of renewable energy. It has also launched a supplier code of conduct, integrated diversity principles in hiring practices and improved health & safety reporting.
Disclaimer
This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.
Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.
Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales No: 01431068. Registered Office: 22 Bishopsgate London EC2N 4BQ
In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.
AXA Framlington UK Sustainable Equity is a sub-fund of the AXA Framlington Range of Authorised Unit Trust Schemes (the “Trust”). The Trust is authorised by the
FCA and is managed by AXA Investment Managers UK Limited, a company incorporated under the laws of England and Wales with company number 01431068,
having its registered office located at 22 Bishopsgate, London EC2N 4BQ.
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The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested.