The annual review of the SAM Dow Jones Sustainability World Index, the results of which were announced on September 7, sees the addition of 57 companies and the removal of 54. The Dow Jones STOXX Sustainability Index, which features European companies only, will include 25 new companies and remove 29. The four UK additions comprised Tesco, Rentokil Initial, First Group and National Express, while the 11 UK deletions include British Airways, Cadbury Schweppes and Vodafone Group. Accounting for issues such as corporate governance, climate change, supply chain standards and labour practices, the annual review of the index is based on assessment of corporate economic, environmental and social performance.
The assessment also highlighted key trends in sustainability and business:
– the continued progression of sustainability from corporate strategy and operations into product and service offerings
– first generation themes such as corporate governance and environmental reporting are becoming mainstream essentials
– increased visibility of transparency and accountability along the entire supply chain in policies and control mechanisms
– increasing linkage of sustainability indicators to financial value drivers, and integration into annual reports.
– wide recognition and acknowledgement of the importance of human capital management for their success.
SAM has extended the Dow Jones Sustainability Indexes to include dedicated benchmarks for North America and the United States, the Dow Jones Sustainability North America Index and the Dow Jones Sustainability United States Index. The DJSI North America will include the top 20% in each sector of the biggest 600 North American companies. Contact SAM 00 41 1 395 2828 http://www.sustainability-indexes.com
in brief
Bovespa, Brazil’s stock exchange, is launching a sustainability index on December 1. It will track the country’s 40 most responsible companies, to be chosen from a list of Bovespa’s 150 most liquid stocks. Contact Bovespa 00 55 11 3233 2000 http://www.bovespa.com.br
Innovest has launched Global Compact Plus, a research tool to assist investors in assessing companies’ relative capabilities and strategic positioning in addressing the competitive risks, challenges and opportunities posed by the ten principles of the UN Global Compact. Contact Nicola Simpson,Innovest 020 7073 0470 http://www.innovestgroup.com
FTSE4good news
Another 42 companies have been added to FTSE4 Good Index in the semi-annual index review, the results of which were published in September, while 24 have been deleted largely for failing to meet environmental criteria. All three of the British companies deleted – The UNITE Group, Woolworth’s, The Wolverhampton & Dudley Breweries – were removed for failing to meet environmental criteria. The US-based Liberty Media was deleted on the basis of supply chain issues, while the Japanese Furukawa Electric was removed for having interests in nuclear power activities. Contact Jo Mayall, FTSE4Good 020 7866 1821 http://www.ftse.com
Ethical difficulties
Only one in 20 British adults invests in ethical funds, largely because of a lack of awareness and understanding, new research from Insight Investment reveals. Over two-fifths (42%) of the 1758 people surveyed admitted to not knowing what an ethical fund is, while a tenth said they wouldn’t know how to invest in one. Less than a fifth of the 35% who would consider ethical investment would base their decision purely on the likely return on their investment – over half (55%) said they would do so as they feel it is an easy way to make a difference. Contact Amanda Ashworth, Insight Investment 020 7321 1568 http://www.insightinvestment.com
Editorial Comment
Who’s up, who’s down and who’s out? The annual announcement season from Dow Jones sustainability indexes FTSE is always good clean fun, though with a hard edge, as the attitude of investors is one of the acid tests of whether CSR really matters. The significance is not the volume of money in so-called ethical or SRI funds, which remains a very small fraction of the total. Rather it is what the investment methodologies teach us about how to achieve above-average returns.
The FTSE4good is essentially about screening out unethical ‘bad’ things, while the Dow Jones sustainability indices looks for ‘good’ drivers of sustainable performance. The former should help with short-term reputational issues – and the City is notoriously short term in outlook – while the latter is more forward looking and long term, preferable to aficionados of CSR and sustainable development. Indeed some SRI funds are now going this route, with Henderson’s 10-year old ethical fund reconfiguring itself as ‘Industries of the Future’. Both approaches have been running for long enough to see which achieves the better returns – cue for an academic study?
Another take on the business case for sustainable development comes from the insurance industry. Big firms like Swiss Re have taken the threat of global warming seriously and indeed their CSR reports feature little else. They should be viewed as the canaries in the mine, warning of dangers ahead for the rest of industry. Weather-related losses are rising – up seven fold over the last 30 years, with US insurers paying out $9.2bn in the 1990s according to research last month from Friends of the Earth America. That feeds straight through to higher premiums. Following Hurricane Katrina, other voices are speaking up on that side of the Atlantic too. Whether from the investor or the insurer viewpoint, money is starting to talk.
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