Highlights from the Waste Management sector.

Chris Murray, P. Eng., CFA

To provide greater transparency for Environmental, Social and Governance considerations for investors to make informed decisions, we have established a framework to appropriately capture the risks and opportunities that are unique to the Waste Management sector. Our analysis leverages the Sustainability Accounting Standards Board (SASB) as a basis to evaluate companies on sustainability and through a deeper review, we have created an ATBesg approach that makes moderate revisions to better reflect our view on the current operating environment. We view existing operations, an acceleration in sustainability-based investments, and the reality that ESG-led initiatives have remained central to the industry’s DNA for decades, positioning the broader waste management sector to provide the critical infrastructure required to support the broader shift toward Net-Zero. Please see our ESG thematic published on January 9, 2022 to understand our framework rationale and broader approach to ESG. 

Pioneers in Sustainability
With the industry’s business model having been largely predicated on forwarding sustainability-based initiatives for decades, we view the waste management sector as well positioned to remain a leader around ESG as the shift to Net Zero accelerates in the coming years. With extensive customer bases touching numerous endmarkets, we view industry participants as uniquely positioned to share best practices and strengthen sustainability-led initiatives across the economy as it looks to shift to carbon neutral. 

More To Come
Greater usage of technology in day-to-day operations, increased investments in renewable-powered vehicles and state-of-art recycling facilities, and a strong focus on corporate culture are among the key themes we see positioning the sector to remain a leader in sustainability in the years ahead, which we anticipate will support stronger margins and returns on capital over the longer-term. We see the growing trend towards consolidation across the space representing a potential tailwind for the rate at which best-in-class ESG practices are adopted across the industry at large. 

Circular Economy Represents an Opportunity
The product life cycle has demonstrated significant transitions in recent years away from ‘cradle-to-grave’ and towards ‘cradle-to-cradle’. This shift towards a more circular economy presents both risks and opportunities for the waste management industry, though we view the shifting focus as representing a net positive for the sector. 

Building on SASB with ATBesg
While we analyze companies through both a SASB and ATBesg approach, we have further broken-down performance into a Best in Class (BiC) and Best In Momentum (BiM) scoring system. ATBesg highlights WM, WCN and GFL as top BiC performers while names like RSG and WCN screen more favourably on momentum.

Chris Murray, P. Eng., CFA 416.520.0267