The Global Compact, the United Nations’ corporate sustainability initiative, has teamed up with environmental, social and governance (ESG) firm Sustainalytics to launch an index of companies committed to the compact’s 10 principles.
The ‘Global Compact 100’, or GC100, has returned 26.4% over the past year, beating the 22.1% return on the FTSE All World, the Global Compact said. Over two years it’s up 19% (FTSE All World: 17.7%) and over the three-year view it’s returned 12% (FTSE: 12%)
The launch comes as the Global Compact holds its high-level Leaders Summit in New York today and tomorrow (September 19-20).
The index comprises a representative group of signatory firms within Sustainalytics’ research universe, based on their adherence to the principles – as well as evidence of “executive leadership commitment and consistent base-line profitability”.
“While the performance of the GC100 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 Global Compact Executive Director Georg Kell. He added the results might also reflect the increasing interest corporate sustainability is getting from investors.
“Portfolios containing companies that exhibit enhanced extra-financial risk management characteristics have the potential to perform better over time. We developed the GC100 to test that hypothesis and these initial results are positive,” added Sustainalytics’ CEO Michael Jantzi.Sustainalytics used its own methodology to research the index, taking account of a range of indicators in the areas of human rights, labour standards, environmental stewardship, and anti-corruption.
It only evaluated the signatories that are currently in its research base – 713 companies in total, out of the almost 8,000 corporate signatories (of which some 1,000 are listed).
The Global Compact stressed that it wasn’t saying the 100 firms analysed are the best performers among its signatories. Kell said the compact has thousands of companies 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.”
Eligibility: Companies need to be GC signatories for at least a year, publicly listed and be within Sustainalytics’ research universe. They must also be profitable.
Selection: Constituents are chosen with the dual goal of having a sector representation within a range of the key, well-known global indices. Constituents are reviewed annually in September. It’s made clear that the GC100 “was in no way produced, endorsed or supported by FTSE or its licensors”. Link