Investors and company value
Shareholders in large companies now have good tools to judge performance on carbon and clean energy. It is firmly on the agenda.
Increasingly, investors are diversifying their portfolios by investing in companies that set industry-wide best practices with regard to sustainability. Two factors drive this development.
First, the concept of corporate sustainability is attractive to investors because it aims to increase long-term shareholder value. Since corporate sustainability performance can now be financially quantified, they now have an investable corporate sustainability concept.
Second, sustainability leaders are increasingly expected to show superior performance and favourable risk/return profiles. A growing number of investors are convinced that sustainability is a catalyst for enlightened and disciplined management, and, thus, a crucial success factor.
What private and institutional investors needed was a global, rational, consistent, flexible and, most importantly, investable index to benchmark the performance of their sustainability investments. They also needed an independent reliable index as a basis for derivatives and funds focused on sustainability companies. In response, Dow Jones Indexes and SAM launched the Dow Jones Sustainability Indexes (DJSI). In London, the Stock Exchange and the Financial Times launched FTSE 4 Good.
In the 10 years since the launch of the Carbon Disclosure Project (CDP), the quality and quantity of reporting on climate change have increased dramatically. CDP contacts major companies worldwide and asks them to report in a standard form on their carbon usage. The results are then published annually. In 2003 less than 250 companies responded. In 2010 the number was over 3,000. Why? It is largely because the investment community has signed up to CDP’s principles of carbon disclosure. It is not just CDP asking the questions, it is investors too. 534 financial institutions with assets of over US$64 trillion were signatories to the CDP 2010 information request. Shareholders want to know what their investee companies are doing about carbon.