Alphabet Inc (NASDAQ:GOOG) a Leader in Sustainability Practices

July 7, 2016

Managing Director Derek Deutsch of ClearBridge Investments says his firm has included Alphabet Inc (NASDAQ:GOOG) in its ESG fund because of the company’s positive impact and sustainability elements.

We believe that Google at its essence is a company that has democratized knowledge. Through its search engine, it makes information easily accessible to anyone that has internet access. First and foremost, we are looking at the product or service that the company provides and whether we think it has a positive impact or not. We think Google clearly meets that test.

Then, we also examine whether the company is managed with sustainability elements imbedded throughout the organization. Google clearly has a sustainable competitive advantage as evidenced by its dominance in search, but it also pays a lot of attention to environmental sustainability. It has been carbon-neutral since 2007. Its data centers use 50% less energy than a typical data center. And it has invested in renewable energy projects around the world.

And then, financially, it has really an incredible business. It has over $70 billion in net cash on the balance sheet, which is about 15% of its market value. It has midteens returns on capital. It generates over $15 billion dollars in free cash flow every year. So it is an incredibly strong company financially, but we think it also does a lot of good things for people and for the environment.

Derek Deutsch