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It Pays to Be Sustainable, Study Finds
Clean capital companies outperform in global survey to be unveiled at Davos, but do not include many U.S. firms.
When it comes to good corporate citizenship, the competition is almost universal and the prize is outperformance, according to a ranking of the 100 most sustainable companies around the globe, compiled by Corporate Knights Magazine, the Canadian-based publication dedicated to clean capitalism.
The results are to be announced Wednesday night at the World Economic Forum in Davos, Switzerland. Since the list's February 2005 inception, the Global 100 ranking, which uses a proprietary methodology to identify and score global companies on 11 performance indicators from energy productivity to employee turnover, has consistently outperformed, or been equal to, the MSCI All Countries World Index. Such outperformance has persisted over the last five or more years, including 2011.
At the top of this years list is Novo Nordisk, the Danish pharmaceutical firm. Novo sees sustainability concerns issues of social, environmental and corporate governance as integral to its overall financial performance and has done so for at least two decades. Novo scored high marks across a number of Corporate Knights' criteria, including a 100 percent score for their Clean Capitalism Pay Link, the score awarded to companies that describe in specific detail how the remuneration of senior executives is tied to the achievement of clean capitalism goals and targets. The Corporate Knights ranking also looks at a company's green house gas, water and waste productivity with an analysis that is weighted against that company's sector.
% Tax Paid
ASML Holding Nv
BG Group Plc
Norsk Hydro Asa
Atlas Copco Ab
It is of little surprise that Scandinavian countries perform well in the Corporate Knights clean capitalism ranking. Institutional investors in that region have a long track record of expressing concern, and engaging with companies, over issues such as environmental records, social and human rights activities, and corporate governance. It remains far less common for U.S. institutional investors and asset owners to be concerned about these so-called ESG environmental, social responsibility and corporate governance matters, and U.S. companies fare less well in the ranking.
True, some companies from the United States make the Global 100 list, but only two of those pharmaceutical, biotechnology and life science company Life Technologies Corp. (No. 15) and semiconductor manufacturer Intel Corp. (No. 18) crack the top 20.
As institutional investors begin moving more assets out of developed markets and into developing markets, the environmental, social and corporate governance reputation and adhesion of companies in so-called BRIC countries Brazil, Russia, India and China will become of increasing concern. Brazil has four companies in the Corporate Knights Global 100 and India one. No Russian or Chinese companies feature. Since Corporate Knights' data is obtained from public filings, the limited disclosure from Russian and Chinese companies, in particular, on sustainability matters remains a huge obstacle to the inclusion of more companies from those regions.