Looking at Restaurants Through an ESG Lens EQUITY RESEARCH | JANUARY 5, 2021 For Required Conflicts Disclosures, please see page 41. Disseminated: Jan 5, 2021 00:15ET; Produced: Jan 5, 2021 00:13ET RBC Capital Markets, LLC Christopher Carril (Analyst) James Hong (Associate) (617) 725-2109 (646) 522-9939
[email protected] [email protected] Sara Mahaffy, CFA (US Equity Strategist) (212) 618-7507
[email protected] January 5, 2021 RBC ESG Stratify: Restaurants In this report, we present our initial findings upon examining our restaurants coverage through an ESG lens, which we expect to be of growing importance for restaurant investors —and consumers—in 2021 and beyond. Together with our RBC Strategy colleague Sara Mahaffy, we explore recent ESG investment trends, and provide detail of our coverage universe's sustainability efforts and goals across key restaurant-specific ESG categories, as EQUITY RESEARCH identified by the Sustainability Accounting Standards Board (SASB). The growing importance of sustainable investing: By our estimate, we’ve identified $476 billion in dedicated sustainable equity funds (with meaningful assets invested in the US), up from just $182 billion at the end of 2018. Net inflows into these funds have accelerated in recent years, with 4Q inflows on pace to hit another new record. In terms of how these funds are positioned in S&P 500 Restaurants, SBUX is the only name that ranks relatively high in the actively managed funds within our universe. The other names (MCD, YUM, DRI, CMG, DPZ) either rank in the middle tiers or lower tiers of ownership. Further improvements in their ESG profiles could allow them to tap into more funds.