Market Beat: 100 most sustainable companies in the world
November 14, 2013
Socially responsible investing has been around for a long time. Investors can purchase mutual funds that will not invest in tobacco stocks or defense stocks or companies that have a track record of being heavy polluters.
Since 2005, a research firm known as the Corporate Knights has been putting together an annual list of the 100 most sustainable companies in the world. The list is announced every year at the World Economic Forum in Davos, Switzerland.
I recently had the pleasure of interviewing the Corporate Knights vice president of research, Doug Morrow, on my radio show and came away from the interview very impressed with their research methodology. The interview can be heard on 99.1 FM talk this Sunday at 9 p.m. for those interested.
What they do is start with about 4,000 companies in the world that have a market cap of at least $2 billion. Then they apply several filters to narrow the list to the 100 most sustainable companies in the world. The first filter screens the stocks for fundamental valuations and eliminates companies that are not strong financially. Then they apply several more filters to determine a company's sustainability.
One metric they consider is the percent of women in executive management and on the board of directors. They look at the ratio of CEO pay to the average worker's pay. Employee turnover is considered. They evaluate energy productivity and greenhouse gas productivity. That is done dividing a company's revenues by the amount of energy they use and also by the amount of greenhouse gases they emit.
Companies are compared to other companies in the same sector for evaluation purposes. The Global 100 is benchmarked to the MSCI ACWI and has outperformed it by 9.5 percent since inception.
The most sustainable company in the world this year is Umicore SA, a Belgian company that specializes in recycling of materials. There are 10 U.S. companies in the current list; Biogen has the No. 1 ranking and is followed by Cisco and Intel.
Right now you can't buy the list in a fund, but an ETF could be in the future. The current yield on the portfolio is about 2.5 percent; I ranked the stocks by dividend yield and there are 14 that pay an annual dividend greater than 5 percent. The Global 100 most sustainable companies in the world can be a good starting point for socially responsible investors.
Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information on his money management service can be found at his blog at http://www.sellacalloption.com or by calling 775-657-8065. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.