The stock market’s reaction to the COVID-19 pandemic was swift and harsh, crashing more than 33% in about a month. The market has bounced back somewhat from those mid-March lows, sparking optimistic talk of a “V-shaped recovery,” where the economy quickly returns to normal, though RBC CEO Dave McKay suggests a longer downturn, with a “U-shaped recovery,” is more likely.

Bank CEOs warn that we should prepare for a recovery period that spills into next year, so let’s examine a handful of eco-friendly companies that will continue to profit during a longer period of pandemic-induced economic pain.

Note: These are investment ideas, not recommendations. Speak to a financial professional before investing and ensure that any holdings are part of a more diversified investment strategy.

Cascades

I would have never picked toilet paper to be the hot commodity as society faces a global pandemic, but here we are. Cascades is a Quebec-based company that makes tissue paper and packaging from recycled materials. The company is the most sustainable toilet paper manufacturer in Canada and is well positioned to take advantage of the growing demand for eco-friendly home-delivery and takeout packaging.

Long considered a leader in developing a closed-loop or circular economy, Cascades uses recycled fibres for 84% of its paper products. The remaining materials are sourced using a strict procurement policy that prioritizes fibre suppliers certified by the Forest Stewardship Council (FSC). In 2015, Cascades set ambitious sustainability targets for 2020, and I’m excited to see how much further they’ll push the targets with their next five-year plan. Cascades was #49 on the 2020 Corporate Knights Most Sustainable Companies in the World list.

Cascades’ share price didn’t dip much in the initial crash, and is up 16 % over the past two months. The stock is expected to pay a 2.54% annual dividend.

Microsoft

The pandemic is forcing everybody to work from home, and Microsoft — the world’s largest company — is perfectly placed to profit from this massive transition in our economy’s workforce. Consumer device sales will likely drop as unemployment rises and people are less likely to upgrade their phones and computers, but only about 36% of Microsoft’s revenue comes from personal computers and gaming. Its other segments include productivity and business processes and Intelligent Cloud. My instinct is that demand for these business-to-business segments will be resilient to the current economic current and will likely benefit as old-school businesses evolve to become completely or much more remote.

Microsoft is highly rated by environmental, social and governance (ESG) rating agencies including Corporate Knights, MSCI and Sustainalytics, and the company has pledged to become carbon negative by 2030. However, Microsoft did come under pressure last year when employees threatened to walk out after it signed a big contract with the U.S. military.

It’s hard to argue that Microsoft is leading us directly into a green economy, but it’s fair to classify it as “doing less harm” and ahead of the curve on corporate responsibility measurements.

Microsoft’s share price initially fell by 27%, but rebounded nicely such that it is only down 5% over the past two months. The stock is expected to pay a 1.19% annual dividend.

Brookfield Renewable Partners

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Brookfield Renewable Partners, the renewable energy division of Brookfield Asset Management that generates electricity through hydro, wind and solar projects, is well positioned to resist the current economic storm. (Full disclosure: The author owns shares of Brookfield Renewable Partners).

I consider Brookfield Renewable Partners pandemic-proof because the company’s revenue comes from multi-decade purchase price agreements (PPAs) to sell electricity at a pre-set price. Electricity demand is falling as factories are locked down, yes, but that doesn’t affect the price that Brookfield Renewable gets paid for generating electricity. The weighted average remaining duration of these contracts is about 17 years, so investors can reasonably expect the company to maintain consistent cashflows. Brookfield Renewable Partners seems to be on solid financial footing, having just raised $350 million in green bonds.

I’ve criticized Brookfield Renewable Partners in the past for not reporting sustainability data, so I’m thrilled to see that it’s produced a detailed ESG report for 2019. Now that the company is finally disclosing data, I expect it to start popping up more regularly on lists of sustainability leaders. About 0.2% of its energy generation comes from relatively carbon-intensive natural gas co-generation (also known as combined heat and power), so although it isn’t quite 100% renewable, I still consider it to be green.

Brookfield Renewable Partner’s share price fell by 30% like the rest of the market during the crash, but has recouped more than two-thirds of that loss in the rebound. The stock is expected to pay a generous 4.82% annual dividend.

Tim Nash blogs as The Sustainable Economist and is the founder of Good Investing.

The post Pandemic Portfolio: Three companies well-positioned to weather the crisis appeared first on Corporate Knights.

Few Canadian companies have ever captured the imagination of a U.S. president quite like TC Energy (formerly known as TransCanada Corp). Trump has tweeted about the company’s Keystone XL an astonishing 44 times. Despite the White House’s enthusiasm for the 1,897 km pipeline that would deliver oil sands down to the Gulf of Mexico, investors are still waiting for the ribbon to be cut. Keystone XL has been mired in a years-long legal battle with landowners and environmental organizations and, last month, environmental groups filed a fresh lawsuit to further block/delay the project.

While TC Energy has a new de-Canadianized name and has renamed its energy business “energy and storage,” its capital investment plans tell the same old story: it’s still largely focused on transporting oil and gas, and instead of boosting its renewable business it’s selling it off to help pay off some of its hefty debt load.

In comparison to oil and gas extraction companies, companies like TC Energy are better insulated against fossil fuel price shocks, relying instead on long-term shipping contracts. That means steady cash flows as long as the fossil fuel business is in business, but it does spell some clear long-term risk as the economy transitions away from fossil fuels.

More immediately, when you stack up TC’s $36 billion planned spending on system upgrades and new pipelines alongside its huge existing debt pile, it’s not hard to see why both Moody’s Investors Service and Standard & Poor’s both downgraded the company’s debt.

If you are looking for an energy company aligned with a low-carbon future whose name doesn’t autocomplete on the U.S. President’s tweet deck, Brookfield Renewable Partners could be a nice option. The Toronto-based power utility—technically headquartered in Bermuda for tax reasons—is one of the world’s largest pure-play renewable energy companies.

Brookfield Renewable Partners is majority owned by Brookfield Asset Management, and therefore has access to plenty of capital to grow. They recently announced that they are  acquiring a 50% stake in X-ELIO, a Spanish solar project developer with lots of growth protentional.

Unfortunately, Brookfield Renewable Partners doesn’t produce an annual sustainability report so its disclosure is lacklustre. While it has an awesome portfolio of green energy, the company’s gender diversity and average CEO-to-Worker Pay ratios are nothing to write home about.

It wouldn’t take much for Brookfield Renewable Partners to become an all-round sustainability leader, but with the cash rolling in, it doesn’t seem to be a top priority for senior management. Still, with a much cleaner business model and lower exposure to carbon risk, Brookfield Renewable Partners is this week’s winner of the Sustainable Stock Showdown.

Beta is a measure of a stock’s volatility in relation to the market. By definition, the market has a beta of 1.0, and individual stocks are ranked according to how much they deviate from the market. A stock that swings more than the market over time has a beta above 1.0. Lower beta means less risk.

Have a company in your portfolio that you want to replace with a more sustainable option? Write us an email or send us a tweet!

Tim Nash blogs as The Sustainable Economist and is the founder of Good Investing.

The post Tim Nash’s Sustainable Stock Showdown: Why profits aren’t flowing through Keystone XL appeared first on Corporate Knights.