Sustainability Stock Index Firms Beat Overall Market
Ford, General Electric, Intel, Hewlett-Packard and Campbell Soup are among the companies listed on a stock index of sustainability leaders launched yesterday by the UN Global Compact that shows a total investment return of 26.4 percent during the past year, surpassing the general global stock market.
The GC 100, released in partnership with research firm Sustainalytics, is composed of a representative group of Global Compact companies selected based on their adherence to the 10 principles as well as evidence of executive leadership commitment and consistent base-line profitability.
The GC 100 tracked the stock market performance of these companies during the past three years, comparing the results against a broad market benchmark, the FTSE All World. The data for total returns is as follows:
- GC 100 rose 26.4 percent during past one year; FTSE All World rose 22.1 percent
- GC 100 rose 19 percent during past two years; FTSE All World rose 17.7 percent
- GC 100 rose 12 percent during past three years; FTSE All World rose 12 percent
Georg Kell, executive director the UN Global Compact, says based on the performance of the GC, there “appears to be an exciting correlation” between corporate sustainability practices and stock performance. The results may also reflect the fact that investors are paying more attention to firms’ sustainability performance, Kell says.
Sustainalytics CEO Michael Jantzi says the team developed the GC 100 to test the hypothesis that portfolios containing companies that exhibit enhanced extra-financial risk management characteristics perform better over time. The initial results, he says, are positive.
Sustainalytics carried out the research in constructing the GC 100, using a proprietary methodology that takes into consideration a range of indicators based on the Global Compact’s 10 principles. In creating the index, Sustainalytics only evaluated those Global Compact signatories that are currently covered in its research universe: approximately 722 companies in total. (The Global Compact today includes almost 8,000 corporate signatories, of which approximately 1,000 are publicly traded companies.)
Companies are eligible for the GC 100 if they or their parent company have been Global Compact signatories for a minimum of one year, are publicly listed, and fall within the research universe of Sustainalytics, which provided the research for the index. As well, they must pass a financial screen that requires positive pre-tax earning on average for the three years preceding the index annual review.
In the case that a company is already a constituent of the index, it will only be removed if there are two consecutive years of negative three-year average earnings figures.
The constituents of the GC 100 are reviewed on an annual basis in September.
The Global Compact expelled 99 companies in the first half of 2013 for failure to communicate progress for at least two consecutive years.
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