TORONTO, ON / ACCESSWIRE / July 12, 2023 / By 2026, global Environmental, Social and Governance (ESG) related assets under management (AUM) are projected to soar from $18.4 trillion in 2021 to $33.9 trillion, representing nearly a quarter of the total global AUM. While the main motivation behind this unprecedented surge in ESG investing is often to build a portfolio that aligns with the investor's values, ESG-focused stocks can also make for better investments - both in terms of long-term value, risk profile, and short-term growth potential.
The focus on sustainability and renewable resources can create a more resilient company, better positioned to weather climate-related risks and stay ahead of the curve on evolving environmental regulations. In terms of financials, research shows that companies that incorporate ESG-based goals tend to see it pay off in the form of increased revenue and wider profit margins.
But ESG investors typically find it hard to incorporate food and beverage companies into their portfolios. Legacy brands like Coca-Cola, PepsiCo, and Nestle, for example, have been the top plastic polluters in the world so they don't tend to fit even the most lenient ESG standards.
Meanwhile, the newer brands entering the space with ESG built into their business model from the get-go are rarely publically traded, often getting acquired by another company rather than going public. But the rare gems that have gone public represent some of the best growth opportunities for ESG investors. Here's a look at Flow Beverage Corp (OTCQX:FLWBF), a sustainable functional water brand, as an example of the growth opportunities for ESG investors in the beverage space.
Sustainable Packaging To Become A Key Differentiator In Climate-Conscious Market
Flow offers a portfolio of naturally alkaline water products, including flavored options and a newer line of vitamin-infused waters. All of them are packaged in a carton that's made from 75% renewable plant-based materials, with the goal of achieving 100% renewable packaging by 2030.
With plastic pollution at the forefront of many consumers' and investors' minds, that commitment to renewable packaging is a key driver behind Flow's growth. The water company has become a market leader in the U.S.'s carton format water market, controlling a 45% market share as of the first quarter of 2023.
With pressure mounting for legislators around the world to pass legislation that bans the use of plastic in packaging, other beverage companies could soon be scrambling to switch to plastic bottle alternatives to comply with new regulations. Flow's dominance in the carton format could give them a leg up as competition heats up.
Carbon Neutral Production Will Help Stabilize Operational Costs
The sustainable water company has already achieved net zero operational emissions and transitioned to 100% renewable sources of energy across its facilities. It's aiming to be carbon negative by 2025 while also working toward recycling as much as 98% of its processing water to reduce its impact on local water sources. This reduced dependence on fossil fuels can help insulate the company against volatile energy prices and lower energy costs over the long term.
Responsibly Sourced Ingredients And Materials Meet Strict ESG Criteria
Flow extracts just 2% of the total water capacity from the naturally alkaline springs where it sources its water. Meanwhile, the paperboard used to make its renewable cartons is certified by the Forest Stewardship Council (FSC), a council that verifies the trees used came from responsibly managed forests. That means new trees are planted to offset the ones cut and trees are harvested in a way that prevents biodiversity loss, protects rare old-growth forest, and respects the local practices of the people who live in and depend on the forest.
While these high sourcing standards sound like they could be costly, Flow actually lowered its cost of goods sold last year and grew its gross margin from 26% in the fourth quarter of 2022 to 30% in the first quarter of 2023.
SOURCE: Flow Beverage Corp
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