Good news for enviro-investors

ZURICH-based investment analyst firm SAM Group has released its first annual Australian sustainability index, measuring the performance of Australia’s leading “triple-bottom-liners” against the rest of the market.

Sabian Wilde

According to the Australian SAM Sustainability Index (AuSSI), the companies it targeted as leaders in terms of economic, environmental and social criteria outperformed the Standards & Poor/ASX 200 by 1.1%, with stock prices increasing by 10.7% over the first eight months since the index was created.

Sustainability leaders identified in the 2005 AuSSI include:

Mining & Metals – BHP Billiton, Bluescope Steel, OneSteel and Rio Tinto

Utilities – Australian Gas Light, Australian Pipeline Trust and Envestra

Energy – Caltex, Origin Energy and Woodside Petroleum

Phamaceuticals & Biotechnology – Chemeq, CSL, Novogen and Sigma

Healthcare, Equipment & Services – Cochlear, Mayne Group, Sonic Healthcare and Ventracor

Gold – Kingsgate Consolidated, Lihir Gold, Oxiana and Sino Gold

Transportation – Qantas Airways

The AuSSI has been compiled by SAM group subsidiary SAM Indexes, with the cooperation of Environment Protection Agency Victoria and The Australian newspaper.

SAM Indexes said the AuSSI comprised the top 40% in terms of sustainability out of 184 companies listed on the Australian Stock Exchange, using the same research criteria as the globally recognized Dow Jones Sustainability Indexes for which SAM selects sustainability leaders on a worldwide scale.

Leading companies are chosen from all 21 listed industry categories and assessed in terms of corporate governance, climate change, supply chain standards, labour practices, and human resources development.

According to SAM Indexes, the importance of sustainable development to the corporate community is of increasing importance, with “real and permanent” changes to business practices ad corporate governance playing an important role in the stability of Australia’s leading market performers.

The AuSSI 2005 review identified the following points of interest as a result of its analysis:

Sustainability is moving from corporate strategy and operations into product and service offerings, particularly in the mining and energy sectors.

Industries are creating their own specific criteria to accurately define sustainability leadership, such as the importance of effective carbon emission strategies and “environmentally aware” products in the mining and energy sectors.

The companies involved in the AuSSI listings have almost universally converged around reporting, strategy and systems to improve their sustainability credentials. The SAM Group posited the change was a response to the Enron debacle, with evidence of increased corporate governance procedures from companies not in the AuSSI listings.

The most competitive sector in Australia for sustainability leadership is banking. Leading Australian banks are at the forefront of setting global standards in the industry, particularly in terms of social responsibility, such as a commitment to increasing the financial literacy of their consumers.

Stakeholder engagement has become more significant in the mining industry. This year has seen the local stakeholder engagement growing amongst all companies in this sector, not just the leadership group. The generalisation of this trend will put pressure on market leaders to raise the stakes. The AuSSI review said that stakeholder involvement was increasingly seen as an important method of ensuring project stability and protecting the interests of investors.

As of November 1 2005, the AuSSI will add 10 new companies and delete five of the companies included in the 2005 annual review, bringing the total number of companies listed in the index to 73.

SAM Indexes said the changes would reflect the constant refinements in sustainable asset management analysis and represent emerging industry-specific sustainability standards.

The companies to be deleted from the AuSSI are: Lion Nathan and AWB Ltd (Food, Beverage & Tobacco); DCA (Healthcare, Equipment & Services); FKP Property Group (Estate Management & Development); and St.George Bank (Banks).

Although the annual review of the AuSSI-listed companies reflects changes in the relative position of companies in terms of sustainability within their industry, SAM Indexes said the majority of the companies facing deletion had in fact improved their sustainability performance over the year, only to be overtaken by emerging sustainability leaders.

The 10 companies to be added to the AuSSI listing on November 1 2005 are: Ansell (Healthcare, Equipment & Services); APN News & Media, John Fairfax Holdings, PMP Ltd (Media); Caltex Australia (Energy); IOOF Holdings (Diversified Financials); Macquarie Office Trust Real Estate (Investment Trusts); Nufarm, Rinker Group (Materials); and Sino Gold (Gold).

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