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Vontobel's Swiss equity head names top sustainable pick

Vontobel's Swiss equity head names top sustainable pick

Marc Hänni looks at fundamentals and applies strict environmental, social and corporate governance (ESG) screens when constructing his Raiffeisen Futura Swiss stock fund.

One example of a stock that scores highly both on financial metrics and ESG criteria is manufacturer of building materials LafargeHolcim, which was formed as a result of a merger two and a half years ago.

Hänni said the company pays attention to its carbon footprint as its big factories could potentially have high levels of emissions.

Its profitability has benefited from strong pricing, lower restructuring costs and synergies. The attractive dividend yield and share buyback offer additional share price support, Hänni said.

‘The company has increased its use of alternative fuel, for instance biomass and waste, which reduces CO2 emissions and cuts energy costs.’

The company aims to reduce CO2 emissions per ton of cement by 40%, with levels having already decreased by 26% since 1990.

‘The firm also aims to further reduce dependency on natural resources and fossil fuels by increasing the use of waste from 54 million tons a year to 80 million tons a year.’

The Citywire A-rated manager added that the company has clear and transparent corporate communication with investors and analysts, which helps LafargeHolcim to bypass similar companies in the US or emerging markets.

Around 10 years ago, the company had about 20 factory sites in the US but over the years that has consolidated.

‘The company has built a new site located at the Mississippi river, which is the biggest of its kind in the US and Canada and they deliver products to both the east and west coasts.’

According to the fund manager, the company produces 20-30% less emissions than its competitors. He said LafargeHolcim also made a lot of positive progress in terms of management and compensation of the board.

‘Some companies talk about ESG but don’t take any concrete steps. For LafargeHolcim, it is one of the main areas where the company implements a lot of initiatives, which can have a positive effect on its share price.’

This article originally appeared in the May 2017 edition of Citywire Switzerland magazine.

 

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