Question posed: Are private sector companies addressing all of the sustainability risks — and opportunities — in their sector?
Answers: Yes and No, and sort of says EIRIS – the Ethical Investment Research Services Ltd. The independent research firm looked at the 50 largest global companies and reported that 40% are managing their sustainability risks well. But — are still performing poorly.
Poor performers include Apple, Wal-Mart and Amazon. The potential risk for investors here is that risk to reputation (of brand) because of poor ESG performance could mean that there are also inherent financial risks. Says EIRIS: Unless these companies improve the management of their sustainability risks they are in danger of seeing brand value decline.
Using its EIRIS Global Sustainability Ratings methodology, the organization says it’s possible to identify sector leaders and laggards. And so ExxonMobil and Chevron lag (“a long way”) behind Shell, Total and (sure to raise eyebrows in the US Gulf states), BP in the oil and gas sector.
These results are from the recent “Risky Business” report from EIRIS, an organization which serves more than 100 asset managers with ratings and other services. EIRIS assesses the sustainability performance of over 2,000 large-caps using their proprietary methodology.
The top 50 (largest) companies were analyzed for this year’s report. The report includes EIRIS’ analysis of the top 50 with grades (“A-B-C-D”) and comparisons year-to-year, 2012/2013.
EIRIS designs the Global Sustainability Ratings so that each sector has a risk profile and companies are evaluated as they compare to others in the sector. The idea is that investors can look at the EIRIS ratings as part of their evaluation of material risks — and potential opportunities — for the companies that may be selected for portfolio.
The report identifies companies with improved grades and those with deteriorating grades.
EIRIS provides data on more than 80 research areas covering 2800 companies (Europe, North America and Asia/Pacific.
More information is available at: www.eiris.org
With a London dateline — in June the Obama White House shared the leadership’s perspective on the importance of impact investing in the United States (and globally). The President was at the UK’s G8 Social Impact Summit. The National Impact Initiative (“NII”) was announced by President Barack Obama — the purpose is to expand the use [of impact investing] as part of the Administration’s overall strategies and structured program for economic growth and job development.
We noted that the terms “market-based solutions” and “public-private partnerships” were weaved throughout the discussion.
In London, more than 150 government officials, business leaders, academics, social entrepreneurs, and others gathered to discuss ways to increase impact investing (to spur growth and job development) and leverage the existing and new capital being committed to advancing the Millennium Development Goals (set a decade ago).
Impact investing usually targets geographic areas (such as inner city communities), sectors, specific populations as part of an overall effort to direct financial and other resources to vulnerable segments of the society. SR investors are often in the vanguard of the impact investing trend.
The Obama Administration pointed out its commitment and impact investing at work:
- Regional Innovation Clusters funded by the US Dept of Commerce and Small Business Administration (SBA) to encourage innovation and job creation.
- The SBA’s “Impact Investment Fund” (with US$1 billion committed) and a $1 billion Early Stage Fund through the SBA’s Small Business Investment Company (SIBC) program.
- US Treasury Dept invested in Freshworks Fund (addressing food “deserts” through market-based solutions).
- OPIC (Overseas Private Investment Corporation) has $333 million committed to impact investing in sectors (healthcare, education, renewable resources, water),
- The Accelerating Market-Driven Partnerships (initiative) is a public-private partnership organized by the US State Department to mobilize innovation and investment to address global challenges.
Each of these initiatives present opportunities for companies, financial service and investment organizations, entrepreneurs and small businesses, and other segments of the U.S. economy to leverage for their own impact investing activities. Looking forward, the Obama Administration officials in London said the “NII” program continues to expand to support the growth of impact investing to combine (1) a market-oriented approach with (2) strong focus on the public interest (the “common good”).
You can find out more – and seek your own impact investing opportunities – by tuning in to the National Impact Initiative.