Risky Business – the View from EIRIS

Posted on July 31, 2013 by Hank Boerner – Chair & Chief Strategist

Question posed:  Are private sector companies addressing all of the sustainability risks — and opportunities — in their sector?
Answers: Yes and No, and sort of says EIRIS – the Ethical Investment Research Services LtdThe independent research firm looked at the 50 largest global companies and reported that 40% are managing their sustainability risks well.  But — are still performing poorly.
Poor performers include Apple, Wal-Mart and Amazon.  The potential risk for investors here is that risk to reputation (of brand) because of poor ESG performance could mean that there are also inherent financial risks. Says EIRIS: Unless these companies improve the management of their sustainability risks they are in danger of seeing brand value decline.
Using its EIRIS Global Sustainability Ratings methodology, the organization says it’s possible to identify sector leaders and laggards. And so ExxonMobil and Chevron lag (“a long way”) behind Shell, Total and (sure to raise eyebrows in the US Gulf states), BP in the oil and gas sector.
These results are from the recent “Risky Business” report from EIRIS, an organization which serves more than 100 asset managers with ratings and other services.  EIRIS assesses the sustainability performance of over 2,000 large-caps using their proprietary methodology.
The top 50 (largest) companies were analyzed for this year’s report. The report includes EIRIS’ analysis of the top 50 with grades (“A-B-C-D”) and comparisons year-to-year, 2012/2013.
EIRIS designs the Global Sustainability Ratings so that each sector has a risk profile and companies are evaluated as they compare to others in the sector.  The idea is that investors can look at the EIRIS ratings as part of their evaluation of material risks — and potential opportunities — for the companies that may be selected for portfolio.
The report identifies companies with improved grades and those with deteriorating grades.
EIRIS provides data on more than 80 research areas covering 2800 companies (Europe, North America and Asia/Pacific.
More information is available at:  www.eiris.org