National Express PLC (LON:NEX) and Volution Group PLC (LON:FAN) were added to Berenberg’s ESG top picks list, while J Sainsbury PLC (LON:SBRY), The Gym Group PLC (LON:GYM) and Cranswick PLC (LON:CWK) were escorted out.
Analysts launched the classification in April to highlight companies they believe “have a positive impact on the world”, including examining the reactions of companies to the coronavirus pandemic.
According to the German bank, National Express supports sustainable cities by providing affordable public transport services and was treated “harshly” by the market despite remaining underlying earnings (EBITDA) positive in the second quarter.
The bus operator has growth opportunities in the medium term such as North American school buses and shuttle services and further contracts in Morocco.
Meanwhile, Volution was described as “highly aligned with the ESG-related trends” as its ventilation equipment improves air quality in buildings. Around 59% of its sales are derived from low-carbon products.
“We believe this percentage will increase in the coming years as regulation tightens, such as via the Green Deal, driving demand for energy-efficient ventilation products,” analysts noted.
“Alongside Volution’s leading premium products benefiting from tightening regulatory trends towards energy efficiency and a focus on cleaner air, Volution places operational excellence high on the agenda.”
FTSE 100 grocer Sainsbury’s is no longer in the list after it was downgraded to ‘sell’ due to concerns surrounding its banking business, which is not related to ESG but means the stock may not rise substantially.
While sausage producer Cranswick keeps “best-in-class sustainability credentials” among meat manufacturers, analysts excluded it from the top picks after adding US-listed vegan producer Beyond Meat since it offers a more direct play on food sustainability.
Similarly, The Gym Group is still positive because it makes physical exercise spaces affordable to large numbers of people, however the new addition of CompuGroup Medical, a software developer in the healthcare sector, is a “more attractive” way to gain exposure to good health stocks.
“Ceres offers the market-leading solid-oxide technology, which can run off any input fuel (hydrogen or methane), so it should be very well placed to capitalise on the decarbonisation trend, particularly for stationary power applications,” analysts noted.
“We do not appear to be alone in this view; several blue-chip companies have partnered with Ceres such as Bosch, Weichai Power, Doosan, Honda, Miura and Cummins.”