Ecolab

Sustainability. We mean it.

Fixed Income team

16 September 2020| Recent thinking

Impact investing focuses on companies exclusively seeking positive, measurable, real-world outcomes through commercially successful products and services. This combination of purpose and profit can generate superior investment returns and contribute to the Sustainable Wealth Creation we aim to achieve.

In 2018, Suzano acquired its second-biggest competitor in the Brazilian market, pulp producer, Fibria. This was a cash and shares transaction and required Suzano to take on an additional $9.2bn in debt. This led to a rise in its net leverage to 3.1x in USD at end of the year.

Although many investors could have seen the acquisition as a growth story involving greater financial risk, we saw the situation differently. The real potential for Suzano’s business profile to improve, combined with strong cash flows, well-signposted financial policy and potential benefits through synergies, meant that we took a positive view on the company’s credit profile.

Credit-rating agencies agreed. Standard & Poor’s, for instance, upgraded Suzano to investment-grade status immediately after the merger.

Today, the company is strengthening its disclosure on impacts concerning water, raw materials, energy, chemicals use. It has recently issued a sustainability-linked bond.

Looking ahead, we see opportunity in three key ESG-related areas:

The new bio-economy as a principal long-term commercial driver (SDG 9)
Sustainable forestry ecosystems management; carbon sequestration to get from net zero to net negative (SDGs 13, 15)
Enhancing land-based community livelihoods in areas of operation (SDGs 8, 11, 17)

This information does not constitute a solicitation or offer to any person to buy or sell any related securities or financial instruments.

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For our Impact Opportunities capability, food security is one of nine impact themes that inform stock selection. In our view, there is a clear opportunity for investors to contribute to the development of a sustainable food system for current and future generations. As farming lands are worked intensively, diminishing the fertility of soil and agricultural yields, up to 1.3bn tonnes of food are wasted each year¹ . This highlights the need for long-term solutions for efficiently providing food and water for a growing population without degrading our natural resources. Given the increasing complexity of supply chains, food sanitation and the prevention of foodborne illnesses are essential.

Ecolab, which is held by Impact Opportunities, is a company delivering real impact in this area. It is a global leader in water and sanitation solutions across food-service, food-processing, hospitality, healthcare, industrial, and oil-and-gas markets. Through its cleaning and sanitation products and analytics capabilities, the US firm helps to improve food cleanliness and sanitation, eliminate foodborne pathogens, and reduce both waste and water use.

Clean eating

Ecolab’s food-safety business helps customers improve quality, reduce waste and prevent foodborne illnesses. Through real-time data monitoring, the firm gains insights to create solutions for customers that increase the standard of products and the speed of operations. For example, it has created automated food-safety checklists for quick-service restaurants and improved data delivery for food-safety audits, health-department inspections, cleaning and sanitation.²

The group’s healthcare division also aims to reduce the risk of healthcare-associated infections. Its digital dashboards provide analyses of hygiene practices and predictive analytics to forecast and reduce infections transmitted in healthcare facilities.³ According to the company, these preventable illnesses kill more people every year than breast cancer and prostate cancer combined. As a result, Ecolab plays an integral role in ensuring that potentially lethal contaminants do not spread along the food chain.

Waste not, water wisely

Ecolab also helps its customers reduce their water use, carbon footprint and waste. Global freshwater withdrawals have tripled over the past 50 years, meaning that water scarcity and sanitation are pressing challenges. The firm’s water-saving solutions helped its customers conserve 206bn gallons of water in 2019.

Its warewashing programme, which helps institutional customers clean the equipment used in preparing or serving food, is a case in point. Ecolab has helped Rotana, a hotel provider, implement a warewashing programme using solid detergents and removing the need for plastic packaging. This has reduced Rotana’s packaging waste by 80%, and the solid detergent is safer for hotel staff to handle than liquid detergents.⁴

Impact leaders

By confronting long-term sustainability challenges with commercially successful solutions, today’s impactful companies are the potential leaders of tomorrow. Ecolab, through its innovative food-sanitation systems and ability to help customers reduce waste and water use, is delivering positive, sustainable impact that should also reinforce the strength and profitability of its business.

The value of investments and income from them may go down as well as up, and you may not get back the original amount invested.

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Clean eating

Waste not, water wisely

Impact leaders

Sustainability.
We mean it.

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