Both are among the worst-ranked of the listed housebuilders for their ESG credentials by index compiler MSCI, but this gives scope for them to improve in the next annual review which is coming around for them shortly.
Vistry is AA-rated but ranks in the lowest (fourth) quartile in green building, though Jefferies notes this is the only category where it is ranked outside the top quartile and increased disclosure of the energy ratings of its houses and new targets could see its rating move up.
Persimmon is at the bottom of the listed groups with a BBB rating and ranks in the fourth quartile for product safety and quality and in the second quartile for corporate behaviour and green building.
The housebuilders’ last MSCI review was carried out in May 2020 but with the arrival of a new CEO at the end of 2020, ESG has moved up in priority at the group says Jefferies.
“We believe Persimmon can report improvements and or have announced that it is seeking to target improvements above what is currently reflected in its ratings across a number of meaningful categories.”
Barratt and Berkeley have been consistently ranked AAA, and score meaningfully higher than the nearest AA ranked peer, it adds.
“ESG matters and even for those with armies of specialists, third party ESG ratings are a key part of the toolbox to assess a company’s ESG position and progress.
“Consensus of which is the most appropriate ESG index appears limited, but it is clear changes in ratings can impact the ‘investability’ of stocks and drive stock market performance”
The broker has ‘buy’ ratings on Persimmon, Redrow and Vistry.