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Finance & Investment
EcoAct on How the Dow 30 Measure Up on Climate Action

Since its founding in 2006, EcoAct Group has grown from raising awareness at the local level in France into a global collection of experts engaging with the private and public sectors to aid in the transition to a low-carbon economy. In addition to advising companies on climate change and carbon neutrality strategies, EcoAct also conducts research to assess publicly listed companies’ efforts in these areas.

Having previously assessed the reporting performance of the CAC 40 (France’s stock market index), the FTSE 100 (UK), and IBEX 35 (Spain), today EcoAct released its latest research, Sustainability of the DOW 30 — marking the first year that Dow Jones-listed companies have been included in the project. The results are in stark contrast to the US’ current political climate — many of the world’s most profitable organizations are demonstrating strong environmental action.

Ahead of his keynote at next month's New Metrics '18, we spoke to EcoAct North America CEO William Theisen to learn more.

For those who aren't familiar with your assessments, could you provide a brief introduction?

Many of our clients in the US want to know the trends that are happening in their sector and on a more global level. This research assessing listed companies is a way to show, and hopefully inspire, a wider audience on where the focus is and how sustainability is evolving.

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In the analysis, only the most recent public company disclosures are scored — using annual, integrated and corporate sustainability reports and any additional links from company websites, including sustainability microsites and blogs.

This year is the first time Dow Jones-listed companies have been included. How did they stack up against the other indices that you have evaluated in the past?

The companies listed in the Dow Jones index are some of the largest and most profitable organizations in the world and so their addition to the report significantly expands the scope of the research. What this told us is similar to what we are seeing with our US clients, that sustainability is not just driven by government regulation but also maintaining competitiveness in the global marketplace. That said, the question is, how consistent is sustainable performance on a wider scale? Leading companies are taking action, but if there is no push at the federal level for sustainability across the board, does that mean that other countries with regulation are becoming more robust and climate resilient?

Additionally, the United States is the second-largest global emitter of greenhouse gases, which again highlights the importance of analyzing sustainability trends in American companies. The top three best practice companies are recognized as Microsoft, Intel and Johnson & Johnson; two of these represent the top-performing industry, recognized as Information, Technology and Telecommunications. 83 percent of the companies within this sector made it into the top 10, reflecting just how well the industry performed. Only one company represents the DOW 30 in the combined top 10 table (Microsoft) but it performs better than any other company across all four indices.

What are some of the key areas where Microsoft is outperforming others?

With a score of 94 percent, Microsoft not only topped the DOW 30 scoreboard, it outperformed all companies across the other three indices. It has also demonstrated consistently high performance, with scores exceeding 90 percent in all four assessment categories. Microsoft’s remarkable achievement is reinforced by the fact that it is 1 of only 2 carbon-neutral companies (Microsoft and Goldman Sachs) in the DOW Jones 30.

Microsoft’s vision “to empower every person and every organization on the planet to achieve more” drives its strategy to support the low-carbon transition and has led it to explore innovative technological solutions such as greener data centers, artificial intelligence tools for the environment and tech-based responses to water scarcity. This strategy has generated annual carbon savings of 9.5MtCO2e and reduced the company’s overall environmental impact by using 500MW of new wind and solar energy and recycling over 10 million kilograms of consumer e-waste.

What areas or issues contributed to some of the lower scores in your assessment?

While there were areas where the Dow Jones 30 scored lower compared to other indices, we do see this changing in the current work with many of our large corporate clients. For instance, in the report, 70 percent of DOW 30 companies do not have a plan to mitigate climate-related risks. With the integration of the Taskforce for Climate Financial Disclosure (TCFD) into the CDP reporting framework and increased investor interest in this area, we have seen a significant uptake in our clients looking into these risks and assessing how to adapt.

Also, only 7 percent of DOW 30 companies are carbon neutral, which is a trend across other indices, too. That being said, we have seen a resurgence of companies looking at carbon neutrality as a way to integrate a sustainability strategy, but also differentiate by aligning the offset projects they support with their value chains, the Sustainable Development Goals, or with their overall business strategy. Microsoft exemplifies how carbon neutrality plays a significant role in how they incentivize carbon reductions while supporting clean development globally via the purchase of carbon offsets and renewable energy. As more companies align with the Paris Agreement, which calls for a carbon-neutral world, carbon markets such as the European ETS and California become increasingly commonplace. So, we are seeing renewed interest in achieving carbon neutrality from the private and public sectors. According to ***Ecosystem Marketplace***, there was a 30 percent increase globally to over 42 million on credits being retired. Just in the US in the first quarter of 2018, there were 1.9 million tons in the voluntary market. Momentum is growing!

What were some of the key trends among the DOW 30 that surprised you?

While when we think of how at a federal level it seems that regulation is decreasing in the US, it was exciting to see that internal governance of individual corporations has prevailed. CEOs from 50 percent of the largest companies in the DOW 30 have publicly committed to continuing action against climate change. We also found that the lack of mandatory reporting regulations, like those implemented in the UK and France, has not resulted in lower standards of emissions reporting, with 100 percent of companies reporting their Scope 1 and 2 emissions and 80 percent reporting some form of Scope 3. A large uptick in companies reporting admissions in the US is definitely due to investors now wanting more environmental data and to ensure that their investments can adapt to a changing climate.

I think one aspect that was surprising was that only 27 percent of DOW 30 companies have solid commitments to reach 100 percent renewable energy, if they haven’t already done so. Renewable energy initiatives are widely publicized in the US, so it’s curious to see that we may not be making as quick of a transition to renewable energy to the level we are communicating at.

The DOW 30 index has the highest proportion of companies offering incentives for sustainable behavior from their employees at 37 percent, and 30 percent also offer remuneration incentives to upper management for performance in line with sustainability targets. This statistic was key in demonstrating that sustainability is a top propriety coming from the very top of the company.


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