What are we looking for?
North American companies that rank highest among their peers based on environmental, social and governance policies and procedures.
The screen
Environmental, social and governance (ESG) investing has emerged as a major theme in the world of finance, made evident by a number of investment funds that have been developed with strategies aligned to this particular mandate.
ESG investing refers to the non-financial actions a company takes to become a socially responsible entity and often correlates directly to an effective management team. The screen below is based on ESG-specific metrics and includes companies that have reduced their CO2 emissions over the past three years, and that have increased their ratio of recycled waste to total waste produced over this same time frame. Companies must have also received a score of at least 80 on Washington-based advocacy group Human Rights Campaign's corporate equality index, a benchmarking tool rewarding companies based on lesbian, gay, bisexual and transgender (LGBT) equality in the workplace. All of the companies in this screen have a corporate governance board committee, a resource-reduction policy and provide corporate-social-responsibility reporting in addition to their financial requirements.
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What did we find?
The screen yielded 16 results, with a number of household names topping the list. Not surprisingly, General Electric Co., the largest company in the screen, appears on the list and is widely regarded as an industry leader when it comes to sustainability and advancing social development. The company recently implemented a committee to assess its sustainability performance and reporting, and runs the "Ecomagination" initiative to enhance resource productivity while reducing environmental impact.
Bank of America Corp. scored highly across all three ESG metrics, and over the past year announced a $10-billion (U.S.) initiative to accelerate clean energy investments in emerging economies. On top of this, B of A provided $40-billion to finance low-carbon activities, which helps explain its 21-per-cent decline in total CO2 emissions over the past three years.
This commentary does not provide individualized advice or recommendations for any specific subscriber or portfolio. Investors should conduct further research before investing.
Ryan Gottschalk works in the financial and risk unit of Thomson Reuters and specializes in asset management.