|by Hank Boerner – Chair & Chief Strategist – G&A Institute
The popular corporate equity “baskets” including the Dow Jones Industrial Index, Nasdaq 100, S&P 500, the Russell 1,000 – 2,000 – and 3,000– in essence consist of the underlying value of the corporate shares in each basket (or benchmark for investors).
Today, there is an ocean of stock indexes for asset managers to license from the creators and then apply process and approaches for keeping track of the companies in the fiduciary portfolio, or to analyze and pick from the underlying issues for their portfolio.
Alternative benchmarks and indexes may be dependent on market cap size and have variations in the index family to fine tune the analysis (think of the varieties of Wilshire, Russell, S&P Dow Jones, etc.).
There has been a steady move by many asset managers from “active management” to passive investment instruments, with this transition key benchmarks become an important tool for the analyst and portfolio manager.
One large-cap index really dominates the capital markets: The S&P 500.
G&A Institute’s Annual S&P 500® Research
Here’s why: The S&P 500 Index is the most-widely-quoted index measuring the stock performance of the 500 largest investable companies listed on American stock exchanges. Asset managers licensees like State Street, MCSI, Invesco Capital and London Stock Exchange Group use this index for their constructing ETFs and other investable products.
This universe of public companies provided for our team a solid foundation for tracking and analyzing the activities of these 500 companies as they began or expanded their sustainability reporting. In 2011, that first year. we found just about 20% of the 500 were publishing sustainability reports.
And here’s the dramatic news:
Tracking the Trends
We charted the broad impact of these market-leading enterprises on such reporting frameworks and standards as the GRI and SASB as those standards evolved and matured and were adopted by the companies in the 500. We saw…
CDP disclosure steadily expanded in structured reports and (stand alone) corporate responses to CDP on carbon emissions, water, supply chain, forestry products.
The adoption of UN Sustainable Development Goals (SDGs) by companies as they were in some way conceptually a part of a company’s sustainability strategy (and subsequent reporting).
And more recently, there was the adoption of TCFD recommendations by corporate issuers in the U.S. – that began to show up in reports recently.
Starting with 2010 reporting, the first G&A analysis, we’ve shared the highlights of the research efforts.
Teams of talented, passionate and bright analyst-interns developed each year’s report (you can see who they are/were in G&A’s Honor Roll on our web site). Most of the team members have moved on to career positions in the corporate, investment, public sector and NGO communities.
We’ve organized the deliverable for both quick scanning and concentrated reviewing. Let us know if you have questions about the research results.
Stay tuned to G&A’s upcoming Russell 1000 Index® analysis of 2019 reporting.
This second important index/benchmark was created several decades ago by the Frank Russell Company and is now maintained by FTSE Russell (subsidiary of the London Stock Exchange Group)
The largest companies by market cap companies are available as benchmarks for investors in the S&P 500 (largest cap) and for the next 500 in the Russell 1000.
The ripple effects of the S&P 500 companies and more recently some of the Russell 1000 companies on corporate sustainability disclosure and reporting is fascinating for us to track.
Many mid-cap and small-cap companies are now adopting similar reporting policies and practices. Privately-owned companies are publishing similar reports. All of this means volumes of ESG data and narrative flowing out to investors – and fueling the growth of sustainable investing. We find this all very encouraging in our tracking of corporate reporting.
Here are the details for you:
90% of S&P 500 Index Companies
What is Greenwashing? The Importance of Maintaining Perspective in ESG Communications
New report measures boardroom diversity at top S&P 500 companies
by Hank Boerner – Chair and Chief Strategist – G&A Institute
Remember the great Beatles’ song…Here, There and Everywhere? That’s what seems to be happening with “Corporate Sustainability” these days.
The news and commentary seem to be everywhere now, with an examination of how the corporate sector is embracing the concept and developing strategies, action plans, assigning teams and moving forward to address ESG issues.
When we began our sustainability news, commentary and research sharing at Governance & Accountability Institute more than a decade ago, the items were few and far between, skimpy and more periodic than regularly appearing.
Today, a widening range of media and communications channels bring us the news of what the players in the corporate sector are doing — and how institutional investors and other key stakeholders are responding to same.
We see numerous news stories and commentary about what companies are doing in their sustainability journey…and how this matters in so many ways for the issuer (such as improved risk management, more effective investor relations, greater access to capital, enhanced reputation for recruiting and retaining human capital, preferred supplier status, and more).
G&A Institute is the data partner for the USA, UK and Republic of Ireland for the Global Reporting Initiative (GRI) and in this role, we gather and analyze (and then database) the corporate sustainability and CR reports of literally hundreds upon hundreds of companies.
The progress we’ve seen companies making in their journeys is encouraging and pretty astounding if you think back just 10 years or so (to the dark days of 2008).
And so as companies move ahead in the journey and greatly expand their disclosure and reporting, the communication channels light up with the “sustainability” news, commentary and research focused on a company, a group of peers, investors, an industry or a sector.
We selected a few examples for you this week. First, from the food processing industry, an examination by Kevin Piccione (he describes his company’s effort – Sealed Air, an early sustainability adopter).
He cites the World Economic Forum finding that most “sustainable companies” outperform their peers by a third – but only 2% actually achieve or exceed their sustainability goals. So why do they succeed? A brief review for you.
The second article for you is Harry Menear’s more in-depth piece from Energy Digital, examining which companies stand out for “green credentials”.
His focus is on the Corporate Knight’s “Top 10 Sustainable Companies” roster, which is drawn from comprehensive research on 6,000 companies worldwide across all industries (for companies with US$1 billion revenues).
The companies were scored on energy use, carbon, waste and clean air production, innovation expenditures, taxes paid, diversity of leadership, supply chain management, and other elements of the sustainability journey. Which companies made the Top 10? The link is below for your reading.
The third item is a note of caution from Bloomberg by Emily Chasan and Chris Martin — who point out that in the midst of the growing enthusiasm about corporate sustainability, there are some companies that investors call out for their “corporate greenwashing” (and they name names). The authors cite the recent Ceres report on this (500 companies were analyzed).
They write: Companies are still making questionable claims but accountability is rising.
Emily and Chris tell us companies (and their executives) are being forced now to admit to greenwashing (that is, “gushing” sustainability claims with a tenuous grip on reality).
Examined: Mid-American; VW; Wal-Mart; Amazon; AB InBev SA. There are perspectives shared on this by Calvert, CalSTRS, BlackRock, Neuberger Berman, DWS Group, UBS.
And there are as always many items that our editors share this week in the Highlights, as we say, drawn for you from the many communications channels that our team monitors every day. Let us know your thoughts as to how we are doing and what you would like to see!
This Week’s Top Stories
Achieving your sustainability goals does not mean sacrificing profits
(Thursday – August 16, 2018) Source: Food Processing – Nearly 90% of business leaders believe that sustainability is essential to remaining competitive and despite the clear link between sustainability and profit, only 2% of companies either achieve or exceed their sustainability…
Top 10 Sustainable Companies
(Monday – August 13, 2018) Source: Energy Digital – Which companies stand out for their green credentials? Energy Digital finds out.
Investors Are Increasingly Calling Out Corporate Greenwashing
(August 20, 2018) Source: Bloomberg – Corporate sustainability reporting has risen dramatically over the last few years, with 85 percent of the S&P 500 index producing annual corporate responsibility documents in 2018, up from just 20 percent in 2011, according to the Governance & Accountability Institute. That’s partially due to investor demand. Assets in sustainable investment funds grew 37 percent last year, according to data tracked by Bloomberg.