Investment advisors, fund managers, family offices – they all have their go-to indices when choosing corporate investments. They watch the S&P 500, Dow Jones and Nasdaq indices. Most of us even have favorite stock pickers with less stodgy parameters (who hasn’t been beguiled by Seeking Alpha or the Motley Fool?).
What are the indices guiding the over $11.6 trillion in US assets under management (AUM) using SRI strategies? Sustainable, responsible, impact investing represents 26%—or 1 in 4 dollars—of total US assets under management (USSIF.org).
Important indices which rank companies based on SRI, CSR (corporate social responsibility) and ESG (environment, social, governance) criteria include:
- Bloomberg Barclays MSCI ESG Indices
- CSRHub
- FTSE 4 Good
- Indices de durabilité Dow Jones (DJSI)
- Morningstar
- NasdaqCRD Global Sustainability Index (NQCRD)
CEOs, CFOs, and VPs of investor relations must pay attention to how their companies rank on these and other indices because investors – institutional and private – watch these closely. There are mutual funds and ETFs based solely on these.
Many sustainability portfolios rely heavily on these indices, and other professional portfolio managers such as Pax World, Domini and Calvert create their own indices which are then used by private investors. AUM in the 780 so-called alternative investment vehicles nearly tripled since 2016, many of them available from traditional investment houses such as Goldman Sachs, Merrill Lynch and UBS.
Companies finding their way on to these indices are rewarded. Recherche CSE has found a connection between financial performance and sustainability strategies and reporting. Of companies with the highest Sustainability scores (as ranked by CSRHub), 73% improved financial results, as expressed by change in revenues 2016-2017. Sustainability Reporting and comprehensive strategies regarding community, employees, governance and environment correlate to a positive impact on profitability.
Sustainability rankings reach beyond the CEO, CFO and Investor Relations. Sustainability concerns permeate the corporate structure. Supply Chain risk and management is only one of many key elements reaching beyond finance and toward Operations. With SRI investments often including exclusionary screening, COOs are affected by investment policies related to conflict risk countries. Sustainability rankings take these and many other criteria, new to traditional corporate thinking, into account.
Want to learn more about how you can leverage your sustainability efforts for higher rankings? Attend the Center for Sustainability and Excellence (CSE) Atelier de formation au leadership en matière de développement durable (ESG) pour les cadres supérieurs, in NYC on Monday September 30th - Mardi 1er octobrest, 2019. Stay tuned for more information.
Le CSE est spécialisé dans le conseil, la recherche et la formation en matière de développement durable à l'échelle mondiale. Il compte parmi ses clients des gouvernements, des ONG et des entreprises du classement Fortune 500. Le CST est accrédité par le CMI et est un acteur organisationnel de la GRI.