Market Beat: The 2014 Global 100 for sustainability
Every year in January, the World Economic Forum is held in Davos, Switzerland. It first started back in 1971. Some 2,500 of the globe’s top business and political leaders, academics, and journalists gather to discuss some of the most challenging issues our planet faces today.
A Canadian company known as the Corporate Knights releases its list of the “Global 100” most sustainable companies in the world every year at Davos. I’ve written about the Global 100 before.
This year’s list has some notable changes over last year’s. The No. 1 company in the world this year is Westpac Banking from Australia. This year, 18 US companies made the list, up from 10 a year ago, giving the US the best country representation on the list.
The top US company for 2014 is Biogen with a score of 75.3 percent and a No. 2 ranking overall. Biogen ranks very high in terms of diversity on its board of directors.
The Corporate Knights have been coming up with the Global 100 list since 2005. The Global 100 has outperformed its index, the MSCI ACWI, since inception.
The methodology for selecting the Global 100 is very detailed. They start with about 4,000 companies worldwide with a market cap of at least $2 billion, and then filter the list down.
They screen for financial stability; by looking at key fundamentals like earnings, cash flow and debt levels, a measure known as the “Piotroski F-Score” is used.
They will consider stocks in almost all sectors, the only companies that are automatically eliminated are in the tobacco and defense industries. Energy giant Shell Oil made the list this year, and so did Monsanto, a company that has been snarled in some controversy over its use of GMOs, or genetically modified foods.
They consider if a company has been fined in the past for environmental violations and the extent of those sanctions. They look at metrics like energy, carbon, water and waste productivity.
They evaluate CEO to average worker pay, safety performance and employee turnover. The end result is a list of 100 companies deemed to be the most sustainable companies in the world.
If you want to learn more about the Global 100, I’ll be interviewing Doug Morrow from the Corporate Knights on my radio show, Ken’s Bulls and Bears Report, on Sunday at 9 p.m. on 99.1 FM Talk.
— 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.