Here’s Why “Sustainability” Equals Profitability

Achieving sustainability is an imperative the world needs to address with no time to spare. Sustainability starts with the energy sector and renewable energies but encompasses other critical commodities as well, along with labor.

Below, I elaborate on the theme and why it matters to investors. I also point you toward a high-quality investment in this arena.

Sustainability is the only path to conquering two looming existential threats: climate change and commodity scarcities. Whether you focus on one or the other or both, they are at the heart of why sustainability is essential for the world to prosper.

Profit from Sustainability

One way that investors can support sustainability, and profit in doing so, is to buy stocks with high ESG ratings. ESG stands for “environmental, social and governance.” These factors have a natural affinity with sustainability, making it logical that companies committed to ESG typically outperform the market.

Companies that focus on ESG tend to produce or use renewable energies and recycle commodities. They also implement systems to ensure fairness in pay, tying raises to productivity and thereby diminishing inequities relating to gender and race. CEOs in such companies tend to answer more closely to a board of directors, one that doesn’t simply rubber-stamp policy decisions.

Common sense and academic research alike suggest that a focus on renewable energies and recycling helps shield companies against spikes in energy and other commodities. Workers who feel fairly treated tend to be more productive and less litigious.

It’s no coincidence that companies with high ESG scores tend to outperform. The stronger relative performance of ESG-focused companies shows it’s smart to consider ESG in stock selection. In common with assessments of management and market dominance, ESG metrics are more qualitative than quantitative. All of these factors help tell you how much confidence you can have in projected earnings and growth.

Highlighting One ESG Standout

One ESG standout we like is Amgen (NSDQ: AMGN), one of the first publicly traded biotech stocks and a first-tier company. Though many of its earlier drugs have long since lost patent protection, the company remains best-in-breed in almost every way.

Few if any companies in the pharmaceutical arena have matched Amgen’s record for consistency. In the past 15 years, the firm’s profits have advanced in all but one (2007, when earnings per share dipped by 6%). Dividends, initiated in 2011, have risen without interruption at an annualized rate well above 10%.

The company’s products cover virtually all pharmaceutical areas. Near-term growth has been led by gains in Otezla, for psoriasis, and Repatha, a drug for controlling a genetically based tendency toward ultra-high levels of LDL (low-density lipoprotein).

Biologic drugs are notoriously hard to replicate and often have patents extended. Enbrel, the company’s most important drug, launched in 2002 to treat autoimmune diseases, is patent-protected until 2028.

Neulasta, which treats side effects of chemotherapy, is another major Amgen drug. While it lost patent protection in 2015, it will likely retain meaningful market share until the mid-2020s. The company’s pipeline may be the broadest in the industry with treatments for cancer, osteoporosis, migraines, immune disorders, and cardio-vascular disease all in Phase 3 trials.

The company’s commitment to sustainability, including its fair and generous employment practices, has contributed to gross margins above 50%. We expect earnings growth to be steady in the high single digits for the foreseeable future and dividend growth to be close to 10%. This superb total return vehicle is for all seasons and investors.

Editor’s Note: As our colleague Dr. Stephen Lebb just explained, you shouldn’t ignore ESG investing. Don’t ignore cryptocurrency, either!

As central banks move markets via monetary policy decisions, investors have sought refuge in decentralized assets such as Bitcoin (BTC) and Ethereum (ETH), which are perceived as immune to government manipulation and control.

Additionally, advancements in blockchain technology and decentralized finance (DeFi) have expanded the utility and functionality of cryptocurrencies, attracting a broader audience of investors and users.

Every portfolio should have exposure to crypto. But you need to be informed, to make the right choices. The experts at Investing Daily have done the homework for you.

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