Cream of the "Clean" – Most Sustainable Companies
Around this time of the year, Wall Street (U.S.), Bay Street (Canada) and individual investors all across the globe search for the “Top 10”, “Top 50” and “Top 100” companies with the most revenue generation, greatest profit margins and highest sales forecasts.
Industry standards, as well as proprietary methodologies are used to compile annual lists of top companies to invest in. This year, Corporate Knights (CK), a media, research and financial services company, has come out with a rather unique list – The Global 100 list of "corporate sustainability leaders". They consider these 100 companies as the most sustainable companies in the world. Here at Market Consensus News, we believe average individual investors should consider adding some of these companies to their portfolio.
CK released this list on Wednesday, Jan 23rd 2013, at the World Financial Forum in Davos, Switzerland.
The Methodology
Starting out with a broad range of over 4,000 mid-to-large cap corporations across the world, CK used a set of Key Performance Indicators (KPIs) to narrow the list down to 350 names. Companies on the short-list were then contacted individually for further screening. Out of this process emerged the Global 100 Finalists. The KPIs used in the analysis involved a wide range of analytical factors: carbon emissions, water and energy consumption, waste production, and a slew of corporate governance items (see Table A for a detailed list).
Although the KPIs used may sound rather broad in their definition, the results in each of these categories are interpreted to provide a true sense of the corporation's sustainability profile. For example, knowing whether a company pays its fair share of taxes, and that its long-term pension obligations are well taken care of, are certainly indicators of true sustainability in the long run. Similarly, measuring employee satisfaction and happiness is another important gauge of a sustainable company.
A Complicated Process (Representation)
Such a complicated process as this is bound to have its share of proponents and opponents – depending on which companies ultimately make the cut. For instance, the list may include "Sin Companies" (companies associated with activities considered unethical or immoral – tobacco companies for example) as well as Health Care and Environmental Service companies. Oil drillers, shipping giants, steel producers and heavy oil explorers all have a fair shot at making the final list. An example is the inclusion of Canadian diversified mining company Teck Resources Ltd, a producer of coal, copper, zinc and other mined resources.
So does this mean the list is unrepresentative of true "corporate sustainability", or that it should be looked at with some suspicion of bias? Absolutely not! As the sponsors of the list point out, the methodology is "product and service-agnostic". Regardless of which sector or industry a company represents, if it can stand up to the strict scrutiny of the KPIs, it will find a place on the list.
The Surprise Short List
Belgium's Umicore, which specializes in materials and recycling technologies made it to the top of the list this year, followed by Brazilian personal care product manufacturer Natura Cosmeticos.
A surprise in this year's list was that the U.S. shared equal honours with its northern neighbor, Canada, with both countries getting 10 of their companies on the list – the largest number of representatives from any single country. Last year only 6 Canadian corporations made the cut. The surprising aspect of the "Canadian connection" is that many of those companies represent businesses such as mining and energy production, extractive industries that are traditionally looked at as "dirty business".
The sponsors believe that one reason so many previously "unsustainable" industries are now making the cut is because they are under much greater public scrutiny regarding their governance and sustainability practices. As a result, they are trying harder than small carbon footprint businesses to demonstrate that they take sustainability seriously.
And the Winners are….!
The top 10 of the Global 100 sustainability leaders are listed below in Table B. While these corporations belong to an elite list of companies that deliver much to the environment, their employees and their governments, there is statistical evidence that sustainability also produces huge dividends to shareholders. Individual investors should definitely check them out.
CK tracks the investment performance of its Global 100 picks over multiple years. They have calculated that since 2005, compared to the MSCI All Country World Index (MSCI ACWI) total return of 50.4%, the Global 100 have generated a total return of 59.9%.
Huh…who knew sustainability also pays big!
For the full list, investors can visit: http://www.global100.org/annual-lists/2013-global-100-list.html
