Companies Beat Overall Market – Return More Than 25 Percent
(New York, 18 September 2013) –
The UN Global Compact today launched the “Global Compact 100” – a stock
index of companies committed to the Global Compact ten principles that
shows a total investment return of 26.4 percent during the past year,
surpassing the general global stock market.
The
“GC 100”, released in partnership with research firm Sustainalytics, is
composed of a representative group of Global Compact 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 marries corporate performance on environmental and social issues
with a requirement of basic profitability. Kell added, “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.”
“We
are very pleased to see the results of this new research. The
performance of the GC 100 Index over the past two years is particularly
notable,” said Michael Jantzi, Chief Executive Officer of
Sustainalytics. “Portfolios containing companies that exhibit enhanced
extra-financial risk management characteristics have the potential to
perform better over time. We developed the GC 100 to test that
hypothesis and these initial results are positive.”
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 Global Compact’s ten principles in the areas of
human rights, labour standards, environmental stewardship, and
anti-corruption. In creating the index, Sustainalytics only evaluated
those Global Compact signatories that are currently covered in its
research universe – approximately 722 companies in total. (The Global
Compact today includes almost 8000 corporate signatories, of which
approximately 1000 are publicly traded companies.)
“It
is important to stress that we are not saying that these 100 companies
are the best performers in the Global Compact,” said Mr Kell. “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.”
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Eligibility for the Index:
Companies
are eligible for the GC 100 if they or their parent company have been
Global Compact signatories for a minimum of one year, are publicly
listed, and fall within the research universe of Sustainalytics, which
provided the research for the index. As well, they must pass a financial
screen that requires positive pre-tax earning on average for the 3
years preceding the index annual review. In the case that a company is
already a constituent of the index, it will only be removed if there are
two consecutive years of negative 3-year average earnings figures.
Constituent Selection Process:
The constituents of the GC 100 are reviewed on an annual basis in September.
Constituents
are chosen for the Index with the dual goal of having a sector
representation (free-float market cap weights) within a range of the
key, well-known global indexes; and to choose companies that have strong
practices and performance in adhering to the principles of the UN
Global Compact around management of human rights, labour rights, the
environment and anti-corruption. Among the indicators used in the
selection of the constituents were the company’s level of reporting in
relations to the Global Compact’s required annual Communication on
Progress and whether or not the company’s chief executive submitted its
required annual letter of support for the UN Global Compact and its
principles.
As
part of the index annual review, there may be changes in the
constituents to better align the sector representation of the GC 100
with global indexes or to replace some constituents due to changes in
company practices or performance with respect to implementation of the
Global Compact principles.
Disclaimer: The GC 100 was in no way produced, endorsed or supported by FTSE or its licensors.
About the UN Global Compact
Launched
in 2000, the United Nations Global Compact is both a policy platform
and a practical framework for companies that are committed to
sustainability and responsible business practices. As a
multi-stakeholder leadership initiative, it seeks to align business
operations and strategies with ten universally accepted principles in
the areas of human rights, labour, environment and anti-corruption, and
to catalyze actions in support of broader UN goals. With 8,000 corporate
signatories in 145 countries, it is the world’s largest voluntary
corporate sustainability initiative. www.
