Sustainalytics: No firm left untouched by climate change
Businesses in every sector around the world will have their bottom line affected - both positively and negatively - by environmental pressures, says green investment service Sustainalytics.
In a new report released on Thursday, the analyst firm identifies 10 companies from 10 different sectors, operating in in eight countries around the world, that will face a material financial impact from environmental, social and governance (ESG) events in 2015. (Scroll down for report summary).
How companies deal with these impacts has been “largely neglected by the market” and therefore presents opportunities for investors and the companies themselves.
“We firmly believe – and our report findings demonstrate – that analysing markets and companies through an ESG lens can reveal risks and opportunities not necessarily captured in traditional valuation approaches,” said Dr. Hendrik Garz, managing director of Thematic Research at Sustainalytics.
“By leveraging our insights, investors can supplement their existing securities selection models or inform new investment strategies.”
Sustainalytics’ research offers a “positive” view of Intel, GlaxoSmithKline, Lafarge and Holcim, Telenor and Pemex, with value drivers ranging from energy efficiency programs to human rights policies and health and safety improvements.
In light of high-profile bribery charges last year in China, GlaxoSmithKline is recognised in the report for making substantive changes to its marketing and sales remuneration practices, which could help curb future ethical lapses.
The research also spotlights Intel’s plan to build a “conflict-free” supply chain by 2016, which reportedly positions the company to capitalize on possible increased demand for “ethical” electronics. Any credibility risks are apparently mitigated by Intel’s history of NGO collaboration.
The analysis takes a generally “negative” stance on DuPont, Lonmin, National Commercial Bank, and, to a lesser extent, Netflix, with concerns relating to water stresses and biodiversity losses in supply chains, amongst others.
Sustainalytics argues that Coca-Cola’s recent entry into the energy drinks and milk niches creates new and potentially under-appreciated ESG risk exposure. The company’s strategic awareness of these risks is gauged to be low.
However, these businesses are not necessarily resigned to negative impacts; Dupont for example has teamed up with Procter & Gamble (P&G) on a new initiative to use renewable agricultural biomass in the production of Tide-branded laundry detergent.
Innovate out of trouble
This type of collaborative, innovative approach is exactly what the doctor ordered for companies facing ESG pressures according to Chris Sherwin, head of sustainability at Seymourpowell, who told edie that firms must adopt “an innovation mind-set rather than arguing, disagreeing or trying to manage their way out of trouble”.
“The best way to prepare for an uncertain future is to be ahead of any future risks,” said Sherwin, although he added that “the penny still hasn’t dropped for many”.