November 2021 Update

Updated Nov. 23, 2021

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It has been a few years since we analysed the financial performance of Sustainable Platform’s (SP’s) most and least sustainable companies. We are delighted to share our latest research, which uses our new carbon analysis climate alignment software, which confirms both our SDG and carbon risk metrics are correlated with higher financial returns.

Sustainable Platform was built on the premise that companies that are more authentically sustainable will outperform the market over the medium and long term. We believe our unique sustainable measurement approach can be useful as a risk lens for general investment purposes for institutional investors and regulators. These results suggest that funds using SP’s unique metrics, climate alignment and sustainable taxonomy should be favoured by all investors.

In this update we looked at the past performance of Sustainable Platform’s most and least 1,000 sustainable companies and assessed the carbon risk and Paris climate alignment of these companies. The average performance (total return) of these stocks was assessed over 1, 3, 5 and 10 years to the end of September 2021. The results are shown below:

Years 1-Yr 3-Yr 5-Yr 10-Yr
SP Top 1000 Returns 56.3% 99.3% 184.3% 269.8%
SP Bottom 1000 Returns 24.3% -27.1% -15.4% -23%

These results are consistent with previous analyses of Sustainable Platform data. Comparing the SP top 1000 and bottom 1000 companies with a publicly available global market index, iShares ACWI ETF (Global ETF), and a publicly available global sustainability index, iShares Dow Jones Sustainability Index ETF (ESG ETF), provides the following results:

Comparison of SP Top 1000 Companies to Global Indexes
Outperformance 1-Yr 3-Yr 5-Yr 10-Yr
SP Top 1000 Companies 56.3% 99.3% 184.3% 269.8%
Global ETF 31.2% 46.4% 92.7% 164.9%
ESG ETF 30.8% 45.3% 82.4% 233.2%
         
SP Top 1000 vs Global ETF 25.1% 52.9% 91.5% 104.9%
SP Top 1000 vs ESG ETF 25.5% 54.0% 101.9% 36.6%

These results show that Sustainable Platform’s most sustainable 1,000 companies have outperformed the global stock market, as well as the most common ESG sustainability index over every period. Interestingly, the outperformance increases as the length of time increases, indicating that Sustainable Platform’s most sustainable companies hold greater long-term value.

This is consistent with a recent independent report by a leading $25B quantitative fund manager, Tactical Global Management (TGM). TGM’s report showed even greater outperformance over other periods, including the GFC and Covid, using our more sustainable company list, when combined with their multi-factor models. The TGM report is available here.

For our analysis, the list of companies was filtered to only include shares with a starting share price greater than one dollar. The 1,000 companies with the highest sustainability metrics were considered sustainable, whereas companies with the lowest 1,000 metrics were considered unsustainable. The companies analysed had listings in 65 different markets and our database holds companies that have (or have had) a market capitalisation or revenue greater than USD $100m.

The SP Carbon Risk and Paris climate agreement analysis of the most 1,000 and least 1,000 sustainable companies are shown below. The most sustainable companies are aligned with the Paris climate agreement 1.5 deg C scenario across all categories of fossil fuel types and overall. The least sustainable companies have been helping create a 4 deg C plus world.

Climate change alignment comparison between most and least sustainable companies

We then assessed the Reputation Risk of companies in the portfolios as well, as shown below. Higher Reputation Risk, as measured by SP, is correlated with worse performance on the stock market.

Benchmark comparison between most and least sustainable companies

Of course, these types of past performance results may not continue into the future, but we have no reason to believe that they won’t. The results are also good news for those investors who want to limit climate change while investing for returns.

Clients can contact us for more details using SP support.

If you are an institutional investor and would like a list of some of the most sustainable companies, or more information about this research please fill in the form here.

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