Crosslands Bulletin

April 3, 2016

Space for Social Investments Is Narrow

Few companies score high enough to qualify as responsible purchases.

The UN sustainable development goals could guide corporate managers. Source: UNDP [http://www.undp.org/ content/undp/en/ home/sdgoverview/ ]

Just over 16% of around 1,600 international companies are fit socially to be considered by responsible investors. The rankings are from Oekom Research, the Munich-based sustainability rating agency. 

While the overall number of potential candidates did not grow in 2015, the share of companies showing at least a decent performance rose slightly compared with the year before; and the share of poor actors fell a bit.

Illustrating the weak level of progress, only 35% of the rated energy suppliers with a generation mix of more than 30% carbon have implemented a climate strategy at all.  Comprehensive plans to reduce emissions were only identified at 18% of them.  Over half of the companies supplied only inadequate quantitative climate data or no such data whatsoever.

The annual corporate responsibility review uses about 100 individual criteria.  They include measures for how the companies treat employees and suppliers, the eco-design of their products, and the scope and quality of their environmental management systems.

The companies are marked from 0 to 100.  Their scores translate into one of twelve letter grades from A+ to D-.  Each sector has a specific cutoff point. The equities of companies falling below their industry’s “prime” status are not recommended. 

For example, Household & Personal Products remains the industry with the best overall score — 47.4, marginally up on its 2014 rating.  Henkel is first with B+, followed by L’Oreal graded B, and Colgate-Palmolive with B-. 

(See the list of top-performers in the table below.)

Industry Leaders by Economic Sector

Industry Leaders by Economic Sector

Johnson Controls (B-)

Auto Components

RELX (B-)

Media

Peugeot (B)

Automobile

Norsk Hydro (B)

Metals & Mining

Akzo Nobel (B-)

Chemicals

Snam (B)

Oil, Gas, Fuels

Vinci (C+)

Construction

AstraZeneca (B-)

Pharmaceuticals

Geberit (B)

Construction Materials

British Land Co. (B-)

Real Estate

Schneider Electric

Electronic Components

Tesco (B-)

Retail

Koninklijke Philips (B-)

Electronic Devices

STMicroelectronics (B+)

Semiconductors

DNB (C+)

Financials

SAP (B)

Software & IT

Coca-Cola Entpr. (B-)

Food & Beverages

Deutsche Telekom (B)

Telecommunications

Coloplast (C+)

Health Equip/Supplies

Gildan Activewear (B-)

Textiles/Apparel

Henkel (B+)

House/Personal Prod.

Lufthansa (C+)

Transport/Logistics

CNP (C+)

Insurance

MTR Corp (B-)

Rail

Atlas Copco (B)

Machinery

Terna Rete (B+)

Utilities

France leads in having industry leaders domiciled in the country.  When companies in second and third positions are included, France has 16 companies in the top three, a significant lead over the UK with 13.  Germany hosts 11, and the US 9.  None of the global large cap companies warrants an A grade.

UN goals could help
Oekom’s directors believe the help is at hand.  Managers might improve their corporate performance and scores if they grasp a set of 17 sustainable development goals adopted by the United Nations in September 2015.  The goals are grouped under five guiding themes labeled people, planet, prosperity, peace, and partnership.

The goals are formulated in 169 targets for the year 2030.  They replace the expired UN Millennium Development Goals.  The new goals are more extensive and complex.  For insance, under the catchword ‘partnership’, the goals focus on all nations equally, not exclusively on developing countries.  They place a much greater emphasis on the role of protagonists outside government, such as businesses and social organizations.

Oekom’s 2106 responsibility review includes 10 examples of how the UN requirements are used in practice in rating corporations.

For information contact Matthias Bönning and Dieter Niewierra, Oekom Research, Goethestraße 28, 80336 Munich, Germany.  Tel: +49 89 54 41 84 90; Fax: +49  89 54 41 84 99; E-mail: boenning@oekom-research.com, niewierra@oekom-rsearch.com

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