How ESG Friendly Is Christmas?

A number of companies that provide popular goods and services during the holiday season have a low or medium ESG risk score

Jocelyn Jovene 16 December, 2020 | 11:51AM
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Christmas chocolates

The Christmas season is usually a time for peace, happiness, family, and also presents. Despite the the difficult times many people have endured in 2020, it is an opportunity to gather and hopefully share a restful and happy moment.

For investors, that might mean thinking about the environmental, social and governance credentials of your portfolio, and taking into account their ESG risk scores. Before you say “Bah Humbug” to that, rest assured there are plenty of stocks that fit the bill and also offer great growth potential.

From a sustainability point of view, we tried to see how ESG-friendly Christmas is. And while splurging money on new products doesn’t look particularly responsible from an environmental point of view, thinking sustainably doesn’t mean you need to rip up your Christmas shopping list.

We have looked at how sustainable some providers of goods and services are, based on the most likely presents people usually exchange during the holiday season.

Toy Makers Score Well on ESG

The overall impression is that most companies in the below list have low to medium risk, based on their Sustainalytics ESG risk score. Our selection is not exhaustive, and you can check the score of other names by visiting Sustainalytics public portal.

Toy makers

Among our cohort, however, it appears that Publishers are among the most ESG friendly companies out there, followed by some luxury goods companies and (breathe a sigh of relief, parents) toy makers, which boast an ESG risk score between 12 and 14 (on a scale from 0 to 100).

publishing companies

Entertainment companies, video games editors and harware products have slightly higher risk. But it is important to recognise that most of the time, the best players in each sub-industry have a very low ESG risk score, which is quite positive. Think HP, Electronic Arts or Vivendi, for example.

video games

From a pure valuation point of view, very few companies currently trade at attractive levels. The only 4-star rated names in the list are education group Pearson, laptop-maker Lenovo, toy-maker Mattel, and communications giant AT&T.

Most other names are either considered fairly valued by Morningstar analysts, and a number of them are too expensive for the long run. That’s mostly the case in the luxury space (LVMH, Kering, Hermes), streaming services (Netflix and Spotify), cosmetics (L’Oreal, Procter & Gamble) and video games (Take-Two Interactive, Sony).

luxury goods

Most of those names look to be at a reasonable risk level from an ESG perspective, but are trading at or above their fair value estimates, meaning perhaps they might not be the ideal gift this Christmas for any investors looking for long-term returns.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Jocelyn Jovene

Jocelyn Jovene  is Senior Financial Analyst and Senior Editor for Morningstar France.

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