Proof of Concept for Sustainable Investing: The Influential Barron’s Names the Inaugural “The Top 100 Sustainable Companies — Big Corporations With The Best ESG Policies Have Been Beating the Stock Market.”

By Hank Boerner – Chairman and Chief Strategist, G&A Institute

Barron’s 100 Most Sustainable Companies

Barron’s is one of the most influential of investor-focused publications (in print and digital format) and a few months ago (in October), the editors published the first of an ongoing series of articles that will focus on ESG performance and sustainable investing, initially making these points:

  • Barron’s plans to cover this burgeoning style of investing on a more regular basis. A lot of possible content that was developed was left on the cutting room floor, the editors note.
  • Says Barron’s: “We are only in Version 1.0 of sustainable investing. 2.0 is where ESG is not a separate category but a natural part of active management.”
  • And:  “Given the corporate scandals of recent days (Wells Fargo, Equifax, Chipotle, Volkswagen, Valeant Pharmaceuticals), it is clear that focus on companies with good ESG policies is the pathway to greater returns for investors!”

The current issue of Barron’s (Feb 5, 2018) has a feature article and comprehensive charting with this cover description:

The Top 100 Sustainable Companies – Big Corporations With the Best ESG Policies Have Been Beating the Market.”

Think of this as proof of concept: The S&P 500® Index Companies returned 22% for the year 2017 and the Barron’s Top 100 Sustainable Companies average return was 29%.

The 100 U.S. companies were ranked in five categories considering 300 performance indicators.  Barron’s asked Calvert Research and Management, a unit of Eaton Vance, to develop the list of the Top 100 from the universe of 1,000 largest publicly-held companies by market value, all headquartered in the United States.

Calvert looked at the 300 performance indicators that were provided by three key data and analytic providers that serve a broad base of institutional investors:

  • Sustainalytics,
  • Institutional Shareholder Services (ISS)
  • and Thomson Reuters ASSET4 unit.

Five umbrella categories were considered:

  • Shareholders
  • Employees
  • Customers
  • Planet
  • Community

There were items considered in the “shareholders” category, like accounting policies and board structure; employee workplace diversity and labor relations; customer, business ethics and product safety; planet; community; GHG emissions; human rights and supply chain.

We can say here that “good governance” (the “G” in ESG) is now much more broadly defined by shareholders and includes the “S” and “E” performance indicators (and management thereof), not the formerly-narrow definitions of governance. Senior managers and board, take notice.

Every company was ranked from 1-to-100, including even those firms manufacturing weapons (these firms are usually excluded from other indexes and best-of lists, and a number of third party recognitions).

Materiality is key: the analysts adjusted the weighting of each category for how material it was for each industry. (Example: “planet” is more material for chip makers using water in manufacturing, vs. water for banking institutions – each company is weighted this way.)

The Top 100 list has each company’s weighted score and other information and is organized by sector and categories; the complete list and information about the methodology is found at Barron’s.com.

The Top 5 Companies overall were:

  • Cisco Systems (CSCO)
  • salesforce.com (CRM)
  • Best Buy (BBY)
  • Intuit (INTU)
  • HP (HPQ)

The 100 roster is organized in categories:

  • The Most Sustainable Consumer Discretionary Companies (Best Buy is at #1)
  • The Most Sustainable Financials (Northern Trust is #1) – Barron’s notes that there are few banks in the Top 100. Exceptions: PNC Financial Services Group and State Street.
  • The Most Sustainable Industrials (Oshkosh is ranked #1)
  • The Most Sustainable Tech Outfits (Cisco is at the top)

Familiar companies names in the roster include Adobe Systems, Colgate-Palmolive, PepsiCo, Deer, UPS, Target, Kellogg, Apple, and Henry Schein.

Singled out for their perspectives to be shared in the Barron’s feature commenting on the ESG trends: John Wilson, Cornerstone Capital; John Streur, Calvert; Calvet Analyst Chris Madden; Paul Smith, CEO of CFA Institute; Jon Hale, Head of Sustainability Research at Morningstar.

Calvert CEO John Streur noted: “This list gives people insight into companies addressing future risks and into the quality of management.”

Top-ranked Cisco is an example of quality of management and management of risk: The company reduced Scope 1 and 2 GHG emissions by 41% since 2007 and gets 80% of its electricity from renewable sources.

This is a feature article by Leslie P. Norton, along with a chart of the Top 100 Companies.

She writes: “…Barron’s offers our first ranking of the most sustainable companies in the U.S. We have always aimed to provide information about what keenly interests investors – and what affects investment risk and performance…” And…”what began as an expression of values (“SRI”) is finding wider currency as good corporate practices…”

The complete list of the top companies is at Barron’s com. (The issue is dated February 5th, 2018)  You will need a password (for subscribers) to access the text and accompanying chart.

For in-depth information: We prepared a comprehensive management brief in October 2017 on Barron’s sustainable coverage for our “G&A Institute’s To the Point!” web platform: https://ga-institute.com/to-the-point/proof-of-concept-for-sustainable-investing-barrons-weighs-in-with-inaugural-list-of-top-100-sustainable-companies/

“Trust” — Think About How Important It Is in Our Personal and Business Lives

by Hank Boerner – G&A Institute

This week I was among the fortunate to be named to the Trust Across America / Trust Around the World organization’s annual recognitions of respected thought leaders who advance arguments about the importance of building / protecting / enhancing / projecting “trust” in our personal, business and organizational lives.

I was named to the thought leader award roster in 2011, 2012, 2013, 20i4, and this year — and so, with 14 other thought leaders, I’ve also been named to the first “Lifetime Achievement Award” by TAA.  This is a great honor for me, and also humbling.

I’m honored to be among such distinguished colleagues, leading thought leaders on trust , including author: Patricia Aburdene (Megatrends); Steven Covey (prominent “trust” author); Medtronic’s former CEO Bill George; Leslie Gaines Ross (Weber Shandwick); trust coach Charles Green; and others of similar stature — the list is at: http://www.trustacrossamerica.com/offerings-thought-leaders-2015.shtml

As a journalist, writer on societal issues, corporate manager, and then consultant to managements and boards, throughout my career I’ve been sharing knowledge of the importance of Trust.

Trust in the leader, trust in the organization, trust in products — these are important resources that can bring the enterprise through a crisis situation.  This applies to both organizations and leaders in the private, public and social sectors — think about the busting-of-trust by brand name leaders who quickly fall from grace; of government officials who in an instant achieved infamy; of not-for-profit or public institutional leadership who squandered trust and good will.  (They, unfortunately, can seem to be legion!)

I’ve had the good fortune to work for and with, outstanding men and women in leadership roles who first built trust as the foundation for the enterprises that they would then build and manage.  I’ve written about them in other places.

“TRUST” in an ancient concept coming down to us through such languages as Old Norse (think: Vikings and the civilizations of Scandinavia); various Old English roots; Dutch; German; and even more ancient languages).  The term conveyed (and I think still conveys) important [modern & ancient] human concepts:  faith/faithful; agreement or covenant; comfort; true/truthful…)

“Trust” if you think about it is at its core a bargain that we make with others, and really with ourselves as well, to keep the faith / to be true (to our words and in our actions) / to keep the agreement with others to live up to theirs and our expectations regarding “trust.”

This Week’s Headlines – and Broken Trust

As I learned of my award, I was humbled, and proud, and reflective.  I thought about my work over the decades in helping others to understand and build trust; of leaders and enterprises who broke the trust with stakeholders; and of leaders who leveraged the valuable treasure (trust they built over time) to gain competitive advantage, to offset the effects of critical issues or crisis events; and I thought about leaders that I admired who conveyed trust as the most important message in their inventory of possible “key messages.”

And then I turned to the morning news and the headlines about trust leaped from the pages – such as those of  The New York Times.

There was one story focused on one of our leading “anchormen” on the NBC News Network, Brian Williams, he is backtracking from and apologizing for telling a story of surviving an attack on the helicopter he was traveling in (in the Iraq war).  The most prominent of our national storytellers (and managing editor of the NBC Nightly News) quickly was engulfed in a crisis — and stepped aside from his duties.

I was impressed by his recognition of what is at stake for him, the network and the news program when he said:  “…I will continue my career-long effort to be worthy of the trust of those who place their trust in us…”

Another story was about our healthcare records, entrusted by us to third parties, and what healthcare and other enterprises do ./ don’t do  — and what might happen to our most personal & private information.  The upsetting headline was about Anthem’s databases of patient information being hacked. This company is one of the nation’s leading healthcare organizations and as many at 80 millions of us doing business with Anthem may have had our information stolen.

This is on the heels of retailers’ records being hacked. (reflecting on the “invasion” of our financial and credit privacy through the Target data hacking).

Trust — do we have it today / will we have it tomorrow when we visit a retail store and are invited to swipe our credit card in the counter terminal? That’s an important question for retailers in fixed locations and those merchandising goods & services in the digital space.  Lack of trust (in the protection of our information) could cost retailers billions’ in lost customers and sales.

And then there is personal trust embodied in our own views and bow we might communicate those views and opinions.  Consider this:  If you think it, and don’t say or write or otherwise share it, you can think really terrible things about that bullying boss, irritating co worker, nagging family member, callous or un-trustworthy business colleague.

But if you say it…write it…email it…  in today’s “ultra-communicative” world, what is “out there” can easily come back to haunt. And so another headline was about one of the leaders of Sony’s movie studio (Amy Pascal) stepping down after her emails were hacked and made public. (The Times played this up with a cute headline: “Pascal Lands in Sony’s Outbox.”)

Can we trust our in-house emails to be protected and kept private — or should we expect something we say, or write (even of sort of to ourselves as a joke or “relief valve”) to then have “it” \splashed across media. (This episode was costly: She was co-chair of Sony Picture Entertainment.)

With thoughts of Florida – the Sunshine State – on the minds of some of us northerners during this wintery season, a story out of Tallahassee, the capital, caught national attention.  (Especially since “trust” in Florida’s governmental institutions may again be critical in the Presidential election of 2016.)

Florida Governor Rick Scott fired a law enforcement official. Florida has some unusual methods of governance; one is the “cabinet” approach, with the [separately elected statewide] Attorney General Pam Bondi, Chief Financial Officer Jeff Atwater, and Agricultural Commissioner Adam Putnam — who, with the Governor, oversee state agencies. Together they decide on hiring and firing in the state agencies.  (All are Republicans – could their actions or lack of action impact on trust in the party?)

The question of trust comes to mind as the governor apparently sidesteps answering his cabinet colleagues’ questions on about the method of the official’s “leaving” — the governor said he resigned, the official said (no) he was fired.

The high-ranking law enforcement official told reporters that he was forced out because he would not do certain things – like bring charges against political opponents (thereby politicizing the office and the criminal justice system).

Also catching my attention was the sudden “explosion” of news & commentary around something that Americans have long taken for granted”  vaccinating against serious diseases. (There is an epidemic of measles cases in a number of states.)

I remember from my childhood getting measles, mumps, whooping cough, and other vaccinations.  Everyone got the shots. As a young adult I was first on line to get (first) the sugar tablet and then the needle containing polio vaccinations.

Now we have the spectacle of political leaders jumping into an important  public health discussion to crassly try to leverage parental fears and anxiety into personal political advantage as they eye upcoming primary campaigns.

Of course, we have the right to have our own opinions and to express these; for the common good, we also have the responsibility to do our part to protect the public health.  My child should not infect your child if that is possible to avoid (say, through community-wide vaccinations).

But, but – there is always a but.  Some people in this debate ask…what about our trust in the vaccination process…in the methodology behind the vaccination…in the drug manufacturer creating the product that we will accept into our bodies…what about the public sector officials who tell us of the necessity and safety of the vaccine?  Trust — or lack of — that is what is on the table here!

Finally for this round, I see the headline of Standard & Poor’s organization paying US$1.3 billion in penalties for its role in putting favorable ratings on subprime mortgage package offerings to institutional investors — that helped to bring about the 2007-2008 global crisis in the financial markets.  Trust — that is what investors had in mind when they looked at the S&P ratings.  Will they trust S&P ratings again in the future?

Trust, we can conclude, is a concept important to our enjoying an orderly society, to our personal well-being, and to getting to the facts and the truth in matters of importance to us. Trust is worth thinking about — every day, in all of our relationships!

 * * * * * * * * *

For information about my awards and Trust Across America, you can check these links:

http://www.justmeans.com/press-release/top-thought-leaders-in-trust-2015-awards-gai-chairman-hank-boerner-named-lifetime

TAA: http://www.trustacrossamerica.com/

 

 

 

We’re a Long Way from NYC’s Stonewall Inn, But Still a Ways to Go for Corporate LGBT Policies, Says Investor Coalition

by Hank Boerner – Chairman, G&A Institute

We’ve come a long way since the gay & lesbian communities mobilized and began in earnest their civil rights campaigns of the 1970s and 1980s and into the1990s. It was the New York City Police Department’s wrongheaded “raid” on the Stonewall Inn in Greenwich Village neighborhood in June 1969 that provided the important spark for the long-term, winning campaign by LGBT community for equal rights and equal protection under the laws of the land. “Stonewall” became a rallying cry for the next installment of the continuing “journey” of the civil rights movement in the United States.

The 1960s/1970s were the era of civil rights protests — we were involved in or witnessed and were affected by the civil rights / voting rights movement; the counter-culture “revolution” (remember the hippies?); the drive for adoption of the ERA (Equal Rights Amendment to the Constitution); and the anti-war movement protests against the conflict in Vietnam.  These were catalysts as well for the LGBT equal rights warriors of the decades that followed the 1969 Stonewall protests.

Finally, in recent years, after years of campaigning by LGBT advocates, most states have been adopting protective measures to protect the LGBT community.  Same gender marriage is a reality in many U.S. jurisdictions.

On November 7, 2014 The New York Times carried an update — it was a “milestone year” for LGBT rights advocates, the publication explained.  Voters in the 3Ms — Maine, Maryland and Minnesota – favored same-sex marriage; the first openly-gay US Senator (Tammy Baldwin) was elected by Wisconsin voters.

Still, there was vocal and often fierce opposition to same-sex marriage and equal protection under the law for LGBT citizens.

About LGBT Policies and the US Corporate Community

Many large companies (estimate:70 companies in the S&P 500 Index to date) have adopted non-discrimination policies to protect LGBT employees in the United States, says the 2014 Corporate Equality Index (a national benchmarking tool of the Human Rights Campaign).

We see these policies and programs for inclusion described in the many sustainability and responsibility reports we examine as exclusive data partner for the Global Reporting Initiative (GRI) for the United States of America.

Still, legal protections for LGBT citizens are not sufficient in numerous US jurisdictions. “Homophobic” policies and attitudes still reign in too many US cities and states and local communities.

And policies, attitudes, practices in other countries?  Well, that’s really a problem, say sustainable & responsible investment advocates — and steps are being taken to address the situation.

The S&R investment advocacy campaign is focused on the LGBT employees of US firms working overseas.  In countries like Russia, one of the world’s largest industrial economies, which has harsh anti-LGBT policies. The US investor group points out that 79 countries consider same sex relationships illegal; 66 countries provide “some” protection at least in the workplace; and in some countries, homosexuality is punishable by death.

In a business environment that continues to globalize in every aspect, with American large-cap companies operating everywhere, the investor coalition is calling on US companies to extend their LGBT policies on anti-discrimination and equal benefits policies to employees outside the United States. A letter was sent by the coalition to about 70 large-cap companies (the signatories manage US$210 billion in assets.

Shelley Alpern, Director Social Research & Shareholder Advocacy at Clean Yield Asset Management explains: “Today, most leading U.S. corporations now have equitable policies on their books for their [American-based] LGBT employees. Ther’s a dearth of information on how many extend policies outside of the U.S. In starting this dialogue, we hope to identify best practices and start to encourage all companies to adopt them.”

The objective of the shareowner advocacy campaign is to stimulate interest in the issue and create a broad dialogue that leads to greater protection of LGBT employees of US companies operating outside of the United States.

Mari Schwartzer, coordinator of shareholder advocacy at NorthStar Asset Management compliments US firms with effective non-discrimination policies and states:  “While we are pleased that so many companies have adopted non-discrimination policies in the USA which incorporate equal protections for LGBT employees, the next phase of implementation is upon us — we must ensure that international employees are receiving equal benefits and are adequately protected.  Particularly those stationed in regions hostile to LGBT individuals…”

Signatories of the letters sent to companies include these sustainable & responsible investing advocates:  Calvert Investments; Jantz Management; Miller/Howard Investments; Office of the Comptroller of New York City; Pax World Management; Sustainability Group/Loring, Wolcott & Coolidge; Trillium Asset Management; Unitarian Universalist Association; Walden Asset Management; Zevin Asset management.

Companies contacted include:  Aetna, AIG, Allstate, Altria, Amazon, American Express, Apple, AT&T, Bank of America, Baxter, Best Buy, Boeing, Cardinal health, Caterpillar, Chevron, Cisco, Citigroup, Coca Cola, Colgate Palmolive, Costco, CVS Health, Delta, Dow Chemical, DuPoint, EMC, FedEx, Ford Motor, General Electric, General Dynamics, General Motors, Goldman Sachs, Google, HP, Home Depot, Honeywell, Human, IBM Ingram Micro, Intel, J&J, JPMorgan Chase, Lockheed Martin, McDonalds, McKesson, Merck, MetLife, Microsoft, Morgan Stanley, Oracle, PepsiCo, Pfizer, P&G, Prudential, Sears, Sprint, Starbucks, Target, Texas Instruments, United Continental, United HealthGroup, United Technologies, UPS, Verizon, Visa, Walgreen, Walt Disney, Walmart, Wellpoint, Wells Fargo.

Summing up the heart of the issue for investors (and corporate employees):  “Corporations must take the extra step to ensure consistent application of LGBT-inclusive workplace policies throughout their operations, regardless of location,” said Wendy Holding, Partner, the Sustainability Group of Loring, Wolcott & Coolidge.