The UN Global Compact (GC) yesterday launched a new stock index of companies committed to the GC's ten principles, which shows a total investment return of 26.4 percent during the past year.
The Global Compact 100 was released in partnership with research firm Sustainalytics and is comprised of a representative group of GC companies selected based on their adherence to the Global Compact’s ten principles, as well as evidence of executive leadership commitment and consistent base-line profitability.
The GC 100 tracked the stock market performance of these companies during the past three years, comparing the results against a broad market benchmark, the FTSE All World.
The data for total returns is as follows:
GC 100 rose 26.4% during past 1 year; FTSE All World rose 22.1%
GC 100 rose 19.0% during past 2 years; FTSE All World rose 17.7%
GC 100 rose 12.0% during past 3 years; FTSE All World rose 12.0%
“While the performance of the GC 100 should not be seen as clear evidence of a causal relationship between a commitment to corporate sustainability practices and stock performance, there appears to be an exciting correlation,” said Georg Kell, Executive Director the UN Global Compact. “Moreover, the results may also reflect the fact that sustainability performance is a factor that is receiving increasing interest from investors.”
The GC 100 combines corporate performance on environmental and social issues with a requirement of basic profitability, GC says.
“Sustainability performance should not be looked at in isolation so we included a requirement of basic financial good health. Both factors are often taken as proxies for the quality of management, which can be an important determinant of investment returns,” Kell added.
Sustainalytics carried out the research in constructing the GC 100, using a proprietary methodology that takes into consideration a range of indicators based on the GC’s ten principles in the areas of human rights, labor standards, environmental stewardship, and anti-corruption. In creating the index, Sustainalytics says it only evaluated those GC signatories that are currently covered in its research universe – approximately 722 companies in total.
“It is important to stress that we are not saying that these 100 companies are the best performers in the Global Compact,” Kell said. “The Global Compact has many thousands of companies that are doing excellent sustainability work. We merely wanted to experiment with the link between sustainability polices and stock-market performance. And the initial results are very encouraging.”
A recent survey by the GC, The Global Corporate Sustainability Report 2013, found that there is a major gap between what companies say and do about sustainability, with 65 percent developing policies at the CEO level and only 35 percent taking action. The survey includes responses from 1,712 companies from 113 countries, and reviews the actions taken by companies to integrate responsible practices outlined in the Global Compact Management Model into their strategies, operations and culture. The survey paints a picture of how companies are addressing sustainability issues including human rights, labor, environment and anti-corruption.
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Founder & Principal Consultant, Hower Impact
Mike Hower is the founder of Hower Impact — a boutique consultancy delivering best-in-class strategic communication advisory and support for corporate sustainability, ESG and climate tech.
Published Sep 18, 2013 9pm EDT / 6pm PDT / 2am BST / 3am CEST