11. December 2020 | 12:51 CET
Linde, Saturn Oil & Gas, Bayer – green return opportunities for 2021
The issue of sustainability is attracting more and more attention in investment decisions. Companies that do not adhere to ESG standards are likely to be increasingly left out in the cold in the future. ESG refers to the consideration of criteria from the environmental (Environmental), social (Social) and responsible corporate management (Governance) areas. But definitions of what is sustainable or green vary widely. We highlight three very different ESG stocks for you. Who has done its homework best?
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ISIN: CA80412L1076 , IE00BZ12WP82 , DE000BAY0017
"[...] In 2020, the die is finally cast in the automotive industry towards electromobility. [...]" Dirk Harbecke, Executive Chairman, Rock Tech Lithium Inc.
Linde Plc - under the magnifying glass
Two years ago, Linde AG merged with its US competitor Praxair. The Company has since been operating as a Plc based in Dublin, but the management is based in the US. It may come as a surprise that Linde is still a member of the DAX. Indeed, a precedent was set at the time. Today, alternating with SAP, the shares even have the largest weighting in the Blue-Chip Index, but also in its "green" relative, the DAX 50 ESG.
Although Linde ranks second to last (49 out of 50) in the separate ESG score, the stock has the highest weighting because it has the largest market capitalization. This example is a classic of the conflicting goals ESG investors face. How are criteria such as sustainability, return, liquidity and risk to be reconciled?
Linde's core business includes gases and process plants that extract or produce gases. The Company is the global market leader in industrial gases. For 18 years, the share has also been a component of the Dow Jones Sustainability World Index. If the stock market traffic light continues to be green, the shares will automatically benefit from their high weighting in the DAX.
Saturn Oil & Gas Inc. – something is brewing
Canadian Saturn Oil & Gas acquires and develops high quality and undervalued, yet low-risk, light oil projects with existing production in Saskatchewan. Numerous wells are producing within the Viking Formation. These have one of the fastest payback periods within the industry in regular times.
Saturn also places a strong emphasis on ESG. It aims to position itself not only among the cost leaders but also to be a player in the innovative reduction of CO2 emissions in the oil and gas industry. To that end, the Company announced a key hire with Jean-Pierre Colin as its new strategy advisor. Colin brings 40 years of investment banking and corporate governance experience. Colin is a director of dynaCERT Inc, a publicly-traded "cleantech" Company in the carbon emissions space. Already on Saturn's board is dynaCERT CEO, Jim Payne.
An interview with Saturn CEO John Jeffrey was published yesterday. The Head of the Company not only addresses the issue of acquisitions but also highlights the importance of ESG for the oil industry and society. In no uncertain terms, he stated: "I can imagine that there may be a change in market awareness and that the origin of oil that the whole world relies upon will become more important. If we provide the required raw material according to modern environmental standards, then society should also value and prefer it as there is a growing global movement to consume ethical commodities."
With the price of oil already heading towards USD 50.00 per barrel, those looking to position themselves in the sector shouldn't take too much longer.
Bayer AG – analysts agree: the stock has potential
The Leverkusen-based Company has been in existence for more than 150 years. Today, Bayer is a globally active group with a focus on health care and agribusiness and is number 8 in the DAX. If you take the ESG criteria into account, Bayer ranks 35th in the DAX 50 ESG. Bayer has been committed to sustainability for a long time. But the Company has suffered much criticism in the past with the Monsanto takeover. It was not the USD 66 billion price tag that was the cause, but the criticism of the US Company's genetically modified products.
The Group's agricultural business suffered this year from weaker demand and exchange rate pressures. The third quarter, in particular, was challenging. However, figures published at the beginning of November showed that after 9 months the Group's sales and profits were on par with the previous year.
Overall, Bayer stock is covered by 21 analysts, and the majority of these analysts come to a positive vote. The average price target of the expert group is EUR 59.00. This price target gives the stock an upside potential of 25%!