by Hank Boerner – Chair & Chief Strategist – G&A Institute

Topline
60% of the Russell 1000 Published Sustainability reports in 2018, however of the smaller set of the 1000 (500 companies) by market cap only 34% are reporting, compared to 86% of the largest 500. Click here for more details.

Question — How many times today do you think you looked at or mentioned a stock index to colleagues?

Some days investor and corporate conversations are all about stock index performance (up, down and sideways!). 

Stock indexes, explains Investopedia, are our powerful indicators for specific economies (such as that of the U.S.A.) and we are of course familiar with the bold face names whose “performance” many media report on constantly  – the “Dow” (the DJIA), Nasdaq Composite and S&P 500(r).

There are literally thousands more indexes/benchmarks used by investors for the analysis of their own performance (“against the benchmark”). Investable products are created using the benchmarks (the intellectual property of their owners (such as the Dow and various S&P indexes, like those for Real Estate, Energy, Consumer Staples, etc.).

The familiar S&P 500® (launched in 1957) has 500 of the largest U.S. companies by market cap and other factors and represents about 80 percent of the total value of the U.S. stock market (it is market-weighted, or capitalization weighted). This is owned by S&P Global Inc. and its S&P Dow Jones Indices units provide a wide range of indexes/benchmarks for global investors.

The 500 and other large-caps are represented as well in another large index universe — the Russell 1000 Index, owned by LSE (the London Stock Exchange). This benchmark for large-cap companies is used by investors to go beyond the S&P 500 to include up to 1,000 of the large-cap U.S. equities, including the S&P 500 companies.

The S&P 500 Index companies are the largest companies with US$8 billion or more in market cap, 50% float, certain liquidity and positive earnings. 

The Russell 1000 Index is a subset of the broad Russell 3000 Index® and represents the largest 1,000 companies in the U.S. equity market (the largest is Microsoft).  About 90% of the total market cap of all U.S. listed stocks are represented by this important bellwether index, says Investopedia.

Each year since 2011 the analyst team at G&A Institute has tracked the S&P 500 companies’ ESG reporting activities.  That first year we found just about 20 percent of the companies publishing “sustainability, responsibility, citizenship” et al reports. 

(These reports have titles such as Corporate Citizenship Report, Corporate Responsibility Reporting, Environmental Progress Report, and so on.)

In 2012 that number rose dramatically to more than half of the companies publishing such reports (53%).  Then each year after the number steadily rose (to 72% in 2013 and up to 86% in 2017).  We share the research results – you can see the latest “Flash Report” here.

The Russell 1000® Research Results
This year we expanded our research to include the “next 500” – the U.S. large-cap companies not included in the S&P 500 Index.  The top-line results:

• 60% of the 1,000 companies are publishing sustainability reports in 2018.
• The top half of the companies align with the S&P 500 universe and comprise 72% of the Russell 1000 universe that does publish a report.
• Of the reporting companies, only 28% were from the bottom 500 of the Russell 1000 Index.
• Of the 40% of that do not report, 83% were those smaller in market-cap, and only 17% were S&P 500 Index companies (reflecting the results of our annual S&P 500 research).

Takeaway: The larger companies by market cap are by a wide margin the publicly-traded firms that publish sustainability and responsibility reports, and it’s clear that their smaller peers in the Russell 1000 have a ways to go to catch up.

Those non-reporters are or will be hearing from their institutional investors that an annual sustainability or similarly-titled report is expected to be published by the firm, following the example of their larger peer companies in the Russell 1000.  Many of the large caps are already being asked questions about their ESG performance by investors, major customers and other stakeholders. 

Within their sector and specific industry categories, the reporting & disclosure pace is set by larger-cap peers.  The laggards (the large-cap companies in the Russell 1000 that are not reporting) will have ever-rising challenges ahead as the larger pacesetters expand their reporting efforts (usually competing with other large peers) and raising the bar for those companies not yet reporting in the respective industry category or categories for diversified firms.

Note the Russell 1000 was launched in 1984 by the Frank Russell Company and is part of a family of indexes that are market-weighted; today the benchmarks are owned by FTSE Russell, a subsidiary of the London Stock Exchange (LSE).

Governance & Accountability Institute team members help companies publish sustainability and responsibility reports and in various ways disclose data and information about their ESG strategies, performance and results (outcomes of the sustainability journey efforts). 

For more information please see our web site at www.ga-institute.com.

Information about our Russell 1000 Index analysis regarding public company ESG publishing is in the Flash Report, our Top Story this week.

Top Stories

FLASH REPORT: 60% of Russell 1000® Are Publishing Sustainability Reports, G&A Institute’s 2018 Inaugural Benchmark Study Shows   
Source: Governance & Accountability Institute, Inc. – In this inaugural benchmark study, G&A found that 60% of the [total] Russell 1000® published sustainability reports in 2018. Of importance to consider is roughly the top half (by market cap) of companies in the Russell 1000® are…