The Ethical Investor is Stockhead’s weekly look at ESG moves.

This week’s special guest is Bell Asset Management co-portfolio manager Adrian Martuccio.


As we look back on the year that was a couple key investment trends spring to mind, like sovereign risk in the energy industry and the rise of cybercrime, but for Bell Asset Management’s (BAM) Adrian Martuccio the lack of oversight of the crypto market was the biggest stand-out moment in 2022.

“It’s a classic bait and switch scenario,” he says.

“Participants have been wowed by the of potential benefits of blockchain technology and the idea of a distributed ledger, however they have been sucked into the biggest Ponzi scheme of all time.

“There is a place for alternative currencies and I’m sure some of these alternative coins based on blockchain will continue, however, the vast majority has just been coin creators stealing money from the public who are ‘uneducated’.

“There is virtually no external monitoring, auditing, or compliance regulation.”

In 2020, Martuccio says Bell Asset Management sold their position in Meta (Facebook back then) due to the fund manager’s inability to get comfortable with management of customer data and controversial posts that make their way onto their platforms.

“They were almost solely focused on revenue growth,” he says.

“This is an industry wide issue that so many social platforms are dealing with, however it came down to our perception of Meta’s philosophy and lack of improvement.

While these platforms want to grow and make money from advertising, Martuccio says Bell Asset Management felt Meta wasn’t actually trying to build a great product.

“They see their customers as ‘the product’ which they are selling to advertisers,” he explains.

“In many respects the company has been hugely successful, but more recently this mindset has backfired and their reputation, their franchise is in tatters and the share price has cratered by two-thirds.”

Ultimately, he says it’s due to poor ESG, horrible governance, lack of real policy and a total disregard for the user.


What are two top ESG trends/issues investors should be aware of in 2023?

Martuccio says the current inflationary environment brings heightened risk of modern slavery in the supply chain.

“We often hear large multinational companies pushing back on price increases from their suppliers,” he says.

“The thing about markets that are fragmented such as the cocoa industry – where many small farmers in very poor countries make up the bulk of supply through a complicated network of buyers and distributors – is that these farmers have virtually no pricing power.

“And are often already living in quite adverse conditions and that could easily be made worse if large multinationals aren’t willing to negotiate.

“We have engaged with various companies on this theme in 2022 because we have seen surveys that have eluded to the point that in many instances, conditions of these small farmers have not improved.”

And secondly, from Martuccio’s point of view, if there was ever a year for companies in environmentally unfriendly industries to transition towards a cleaner future – it is now.

“2022 has been a boom year for the energy sector and in particular producers of oil and gas – earnings of the MSCI World Energy sector have more than doubled from under US$20 a few years ago (e.g. were under US$20 in 2021 and in 2017) and they are expected to reach around US$50 next year,” he adds.

“Many companies talk about their ambitions to transition their businesses towards cleaner energy generation, however capital allocation is often quite sparse, so you ask yourself ‘are they really committed?’

“In such a fantastic environment, will they accelerate their plans…or do they just double-down on investing in their existing core fossil fuel-based revenue generating activities?”

For example, he says ExxonMobil spends more than US$10bn annually in capital expenditures – averaging US$17bn over the last five years – with virtually all of its revenue and profit comes from fossil fuel-based products such as oil, gas, chemicals, and refined products.

“They have committed to spending US$15 billion in a ‘low-carbon future’ over six years, that’s around US$2.5 billion per year or less than 15 per cent of the average capex they have spent over the last five years – is this enough?

“Especially when a lot of it is related to CO2 storage or carbon capture, which is not transitioning to cleaner energy generation, it is just ‘burying the waste.”


What are some companies you are keeping on your watch-list in 2023?

“Unfortunately, some of our best ESG companies have lagged a bit but over the long term we still really love companies like British-based company Croda (LON:CRDA) which develops oleo chemicals,” he says.

“They are an alternative to oil-based products that go into mainly consumer products like creams and also develop peptides which were used in MRNA vaccines for COVID.

“Another company we like is Chr Hansen , they are a Danish company involved in foods like the starters and enzymes used to produce yogurt.

“It has a 60 per cent market share and has just received a take-over bid from another Danish company, Novozymes.”

Another one of Martuccio’s favourites is pharmaceutical company Zoetis (NYSE:ZTS) which develops vaccines for animal health.

“They provide solutions for farmers to prevent illness in their animals and improve productivity which helps to meet the growing worldwide demand for food,” he says.

“And lastly Vestas, a Danish wind turbine producer and potentially a huge beneficiary of some of the regulation that is going on in the US where President Biden has recently agreed to extend the production tax credit (PTC) program.

“This will provide much needed assistance in the growing wind power industry.”