Companies that have continued making environmental, social and corporate governance improvements during the pandemic are continuing to do well, both on ESG efforts and on returns to investors, according to Katherine Kroll, investment specialist at Brown Advisory, a global investment management firm.
Nike is a prime example of that principle, Kroll said in an interview Thursday.
Kroll says she worried Nike might use the pandemic as an excuse to back off its ESG efforts, “but management took it as an opportunity to double down on efforts,” she said.
For that reason, Nike is one of a handful of large-cap companies Brown Advisory recommends for both its performance and sustainability efforts, the firm said in an email. Brown does not recommend particular sectors or asset classes, but rather “looks for the best companies for sustainability and performance across sectors,” Kroll said. “There are exciting picks on sustainability across all sectors.”
The other companies cited by Kroll were Autodesk, Danaher, Ecolab and Etsy.
Nike has been working to improve its reputation on ESG matters for several years already. “This is proof that a company can change its operations and that its competition also will take up the challenge to improve,” Kroll said.
Nike’s long-term sustainability efforts have grown into a competitive advantage for the company, Brown said. “Its lean manufacturing practices and sustainability-focused product innovations have lowered its cost of doing business over time. The company’s footwear modernization teams have rolled out several new technologies that have reduced energy use by approximately 5%.”
Autodesk, meanwhile, is a large-cap company that enables customers to design, visualize and simulate buildings and products in a more energy and resource-efficient manner. “Addressing climate change while meeting the needs of a growing and urbanizing global population is a huge design challenge. The architecture, engineering, construction and manufacturing sectors account for a massive proportion of the world’s carbon emissions,” Brown said, and Autodesk can help reduce emissions.
The firm also likes Danaher for its sustainability results and performance. The company, a conglomerate with headquarters in Washington, D.C., designs, manufactures and markets professional, medical, industrial and commercial products and services.
“Danaher’s businesses are developing advanced diagnostic tools, driving life-saving scientific research and helping ensure the safety of global food and water supplies,” Brown said. “Danaher’s strategy for growth seeks to deliver breakthrough innovations that serve diverse populations around the world, and developing markets continue to offer significant opportunity for impact.”
Sustainability is a core business strategy for another company, Ecolab. “The company delivers a comprehensive set of water, hygiene and energy technologies and services to help companies minimize environmental and social impacts while increasing their bottom lines,” Brown said.
Kroll explained that Etsy, a platform for buying and selling craft-oriented and home consumer goods, “has its finger on the pulse of the consumer,” which makes it good for investment performance. The company is also attaining carbon neutrality by developing strategies to offset for shipping emissions, she said.
In order to make a judgment about the sustainability efforts of a company, Brown Advisory looks at how the managers, who are responsible for ESG efforts, are compensated and what their credentials are, Kroll said.
Sustainability officers “need to have a seat at the corporate table” for a company’s efforts to be effective, Kroll added. “Engagement by shareholders is important” to make companies improve their ESG efforts and to help judge whether they are succeeding.