Bringing textiles to market is a resource-intensive effort, and companies rightly receive significant attention from the ESG world. The pollution produced has a huge impact on the planet, with health and environmental concerns associated with material production including the effects on indoor air quality, chemical emissions from manufacturing and disposal operations, and solid waste impacts on water quality.
From common commodities like clothing to building materials, the sector is responsible for a major share of global material consumption and energy use. For this reason, recognizing which companies are truly pushing for positive change can be a difference-maker when researching potential investments.
ESG ratings are a good starting point, but they shouldn’t be the sole source of information when conducting due diligence on an investment. It’s important to not sweep the background of companies under the rug when selecting where to invest.
Such is the case when comparing these two companies: Interface and Owens Corning.
- Interface is the world’s largest manufacturer of carpet tiles, which are often found in offices. In 1994, Interface committed to becoming the world’s first environmentally sustainable and restorative company and has a goal of being a carbon-negative enterprise by 2040. All of Interface’s flooring products are “carbon neutral,” and it introduced its first carbon-negative carpet in 2020, which produces less carbon dioxide in the atmosphere after it is made than if the carpet had not been manufactured in the first place.
- Owens Corning, on the other hand, is the world’s largest manufacturer of fiberglass composites. Best known for the use of asbestos in its insulation products, the company filed for bankruptcy protection in 2000. Those two facts alone make it an auspicious investment from a sustainability perspective. While Owens Corning has been widely recognized and earned awards for its environmental commitment, none of its products are carbon neutral or carbon negative.
Despite the breakthrough products and the full commitment of Interface’s management to reach its goals, the company gets a below average Environmental score of 45 from S&P Global. In contrast, Owens Corning receives an Environmental score of 96 from S&P Global, the highest rated Building Products company.
Every investment should be considered from all angles. Our recent paper on ESG due diligence explores the subject more fully, but just like the above example between Interface and Owens Corning, it displays how ESG scores do not always accurately reflect the environmental profile of companies.
When it comes to sustainable investing at Reynders, McVeigh, we make a commitment to view ESG ratings in context as part of our overall research. ESG due diligence is a key factor in our process that ensures we make decisions that align with our investment philosophy and client goals.
If you are interested in learning more about how we integrate ESG into our investment process, we encourage you to reach out.
Disclosures: This material is propriety and represents the current, good-faith views of Reynders, McVeigh Capital Management, LLC (“RMCM”) at the time of publication. It is for informational purposes only and should not be transmitted or reproduced to any 3rd party without RMCM’s permission. ESG (environment, social and governance) metrics are based only on social impact, not financial performance. They may not provide a complete picture of social impact as they are only as reliable as the amount of data available. The metrics discussed were compiled in May 2022 by independent third parties (sources linked). RMCM has no direct or indirect affiliation to these third parties.
While this material includes a selection of current RMCM recommendations, it is not a complete list of the companies that RMCM recommends to its advisory clients and it includes companies that RMCM does not recommend to clients. References to specific companies are for illustrative purposes only and should not be relied upon as investment advice or as a solicitation to transact in a particular security or in a particular manner. There is no guarantee that any particular investment will be profitable. Past performance not indicative of future results. All investments involve risk. Please consult your investment advisor before making any investment decisions.
All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed, and RMCM disclaims any duty to update any of the information and data contained herein. Certain statements may be deemed forward-looking, but any such statements are not guarantees of any future performance, and actual results or developments may differ materially from those discussed.