The advisory group says this is the first sustainability index focused exclusively on publicly-traded utilities in the U.S.
The main index, called the Target Rock High Sustainability Index, comprises 15 “high performance” domestic energy utilities that score highly for sustainable operations. Their scores are based on their performance related to environment, economy and society.
Rounding out the top 15 are Pinnacle West Capital, Southern Company, American Electric Power, Entergy, Duke Energy, Unitil, Progress Energy, Idacorp, Wisconsin Energy and NextEra.
As a group, the stocks of the utilities in the index out-performed both utility-specific sector indexes and broader market indices, such as the Dow Jones Industrial Average and the S&P 500, for the ten-year period ending December 31, 2011, according to Target Rock.
Overall the advisory group has published ten sustainability indices for the utility sector. In addition to the main index, there are three “flagship” indices relating to high, medium and low scores on sustainability; three based on high, medium and low scores on combined environmental, social and governance dimensions; and one index each ranking the top 15 economic, top 15 environmental and top 15 social performers.
On the environmental dimension, the top companies are Unitil, PG&E, Avista, Idacorp, Xcel, NextEra, Edison International, Public Service Enterprise Group, NV Energy, Sempra, Allete, Teco Energy, Northeast Utilities, Duke Energy and Pinnacle West Capital.
Chief executive Richard Rudden says investment in sustainable utilities makes sense for many investors. Pension funds and older individuals are seeking less volatile, longer-term returns with moderate potential for price gains. But he said the markets have lacked an effective measure of utilities’ sustainability performance.
Assets under management by socially responsible investment (SRI) funds could reach $9 trillion in the U.S. alone by 2015, Target Rock says. According to the company, investor-owned public utilities are an under-appreciated asset class, and have a ripe potential funding source in SRI funds. Utilities are expected to need $2 trillion in capital by 2030, the advisors said.
Target Rock co-founder and partner Kyle Rudden said the lack of sustainable utility index has been surprising, given how complex the utility segment is and how different it is from other sectors commonly found in sustainability indices.
Target Rock will be releasing additional rankings and indexes in the next few months.