Top 10 stocks in the transition to net zero
These companies have been selected from the S&P/ASX 300 based on outcomes and their environmental, social, and governance (ESG) commitment.
Key elements in common include lower-than-average ESG risks, comprehensive reporting to international standards, intentional incorporation of ESG into their businesses via policies, board oversight and executive remuneration linked to ESG objectives.
Greenhouse gas emissions are measured and assessed in three ways: Scope 1 (direct), Scope 2 (from energy) and Scope 3 (indirect).
1. Basic materials: Vulcan Energy (VUL)
The lithium and renewable energy producer has big ambitions that include decarbonising lithium production.
It is dual-listed on the Australian and Frankfurt stock exchanges. Its aim is to become the world's first net zero integrated lithium and renewable energy provider.
2. Communication services: Seek (SEK)
The largest global online employment marketplace has a presence in Australia, New Zealand, Hong Kong, Southeast Asia, Brazil and Mexico.
It has a comprehensive sustainability framework, detailed reporting and has targeted net zero across all scopes by 2030.
3. Consumer cyclical: Super Retail Group (SUL)
The company operates in the leisure and sporting goods, auto accessories and outdoor retail sectors.
It aims to achieve net zero emissions across Scopes 1 and 2 by 2030 for the Australian and New Zealand stores, distribution centres, offices and operations within its direct control.
Super Retail is the highest-ranked company in the Morningstar Sustainalytics sub-industry automotive retail category, but there is more work to do, particularly on Scope 3.
4. Consumer defensive: Coles Group (COL)
The supermarket chain has built a pathway to decarbonisation to manage climate-related risks using science-based targets and expects to use 100% renewable electricity by 2025.
Its net zero ambitions don't yet account for Scope 3, which make up the bulk of its emissions, but it is engaging with suppliers to start addressing this significant gap.
5. Energy: Origin (ORG)
As a major integrated electricity generator and electricity and natural gas retailer, Origin has high ESG risks but its ambition to achieve net zero across all three scopes by 2050 in alignment with the Paris Agreement puts it in a strong position for the sector.
It has demonstrated an interest in beefing up its renewable energy capacity and has exposure to wind, solar and hydrogen renewable energy sources.
6. Financial Services: QBE Insurance (QBE)
Insurance companies like QBE obtain the bulk of their revenue from premiums generated from property and casuality insurance.
QBE's underwriting efforts place it at the forefront of ESG risk, particularly regarding the impacts of climate change.
It has committed its insurance and reinsurance underwriting portfolios to net zero greenhouse gas emissions by 2050 within its own operations.
It is reducing Scope 1 and 2 emissions and has extended its commitment to containing its material Scope 3 emissions. It also plans to source 100% of its electricity from renewables by 2030.
7. Healthcare: Sonic (SHL)
The third largest medical diagnostics company in the world aims to be net zero across all scopes by 2050 with credible pathways and securing 80% of its energy from renewable sources
by 2030.
But it would be great to see climate change scenarios analysis and comprehensive enforcement of the supplier policy.
8. Industrials: Brambles (BXB)
The supply chain solutions company is advanced in terms of sustainability with a clear pathway to achieving net zero across Scopes 1, 2 and 3 by 2040, having already achieved carbon neutral targets to scopes 1 and 2 ahead of 2025 financial year targets.
The company has a clear pathway to decarbonisation and measures itself against science-based targets.
9. Real estate and utilities: Goodman Group (GMG)
The integrated commercial and industrial property group is a carbon neutral organisation, certified by Climate Active, with a broad range of affiliations and partnerships.
It has made carbon reduction commitments including 42% reduction on absolute Scope 1 and 2 greenhouse gas emissions and 30% reduction in square metre intensity of Scope 3 emissions by
2030 from a 2021 baseline.
10. Technology: Xero (XRO)
With the commitment to net zero by 2050 across all scopes, the tech company's interim pathway is consistent with science-based targets.
It is certified carbon neutral by Climate Active and has been offsetting its carbon emissions since 2019. Xero reports to global standards and provides a databook with environmental social data points and a supplier code of conduct. Scope 3 is a work in progress.
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