European small-cap equities: sustainable innovation in practice
The European small-cap universe encompasses numerous sustainability-conscious companies doing innovative work that potentially enables them to outperform their competition. Below, we outline two company case studies, where we believe in-depth research and engagement has helped uncover significant potential.
The first is a UK manufacturer of hard landscaping products. This company has not historically been viewed as an ESG leader by the market as it is a high carbon-emitting sector and relatively high emitter for our universe. In reality, it has a very thoughtful and innovative approach to ESG and sustainability.
- This unexpected ESG leader has a long-standing agenda on all aspects of ESG, and an increasing percentage of its research and development budget has been channelled towards sustainable and environmentally conscious projects.
- The company manufactures innovative anti-flooding products, provides product-level carbon-data, which is unique in the industry, and has even developed a carbon-neutral process for manufacturing concrete bricks.
- Its offering helps customers to manage their environmental impact, reduce their carbon emissions and make informed product decisions. In addition, it reports full CO2 emission data on large-scale construction projects.
The second example is a Scandinavian producer of biochemicals. Again, the market and existing ESG metrics have failed to capture the significant strides this company has made in relation to ESG and sustainability.
- For more than a decade, this company has evolved from a relatively cyclical business with a narrow end-market exposure to one that has a diverse and expanding range of new applications, all requiring natural raw materials.
- Using every component of its raw material — wood — and the expertise of its R&D and technical sales team, the company enables customers to replace oil-based products and ingredients with sustainable alternatives.
Thanks to its innovations, wood-derived ingredients are now prevalent in everything from concrete admixtures and plant protection to animal feed, electric car batteries and even toothpaste.