Sempra Energy (SRE), Xcel Energy (XEL), PG&E Corp. (PCG), Edison International (EIX) and Avista Corp. (AVA) are the top five US utilities when it comes to Triple Bottom Line business practices and operations, according to Hauppauge, NY-based Target Rock Advisors. The five publicly owned utilities are among a total 15 “high performance” US utilities comprising the Target Rock High Sustainability Index, which is based on using Target Rock’s proprietary system to systematically score and rank publicly listed US companies across the three pillars of Triple Bottom Line business practices and operations: environment, economy and society.
Testament to the ability of Triple Bottom Line businesses practices to flow through to the traditional ‘bottom line,’ Target Rock found that the 15 High Sustainability Index companies as a group outperformed the Dow Jones Industrial Average and the S&P 500 for the ten-year period ending Dec. 31, 2011.
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US utilities, SRI and the triple bottom line
Socially responsible investment (SRI) has been growing steadily in the US and abroad, highlighting the need for comprehensive, in-depth and timely metrics and analysis. As Target Rock notes, the Forum for Sustainable and Responsible Investment estimates that some $3.1 trillion of investment capital is now managed according to SRI principles and methods, accounting for 12.2 percent of US investment capital. Robeco/Booz & Co. forecasts that SRI assets under management will increase and exceed $9 trillion in the US alone.
As a group, power utilities have traditionally been viewed as conservative, high-yielding equity investments. The extended period of low to near-zero US interest rates has made investing in high dividend-yielding stocks especially attractive. Meanwhile, the emergence and growth in renewable, clean energy and smart grid technology and businesses, along with market deregulation, has injected an element of growth and dynamism into the sector.
Furthermore, as critical, highly regulated private sector businesses, they should be evaluated not only on traditional ‘bottom line,’ but on broader Triple Bottom Line performance measures that encompass environmental and social performance attributes as well.
Target Rock says its High Sustainability US Utilities Index is a much-needed first of its kind. “This is surprising when you consider how complex and different the utility segment is from the other industry segments that are normally included in multi-segment indexes,” elaborated Kyle Rudden, co-founder and partner at Target Rock and the chief architect of both the scoring system and indexes.
“There is a tremendous need for a utility index based on a sophisticated knowledge of the sector. Institutional investors and asset managers have lacked a system that offers highly useful sustainability performance information.”
Target Rock has developed a family of ten sustainability indexes. Its four flagship indexes rate and rank companies based on their overall sustainability scores (High, Medium, Low). Three are based on scores across Environmental,k Social and Governance dimensions of the Triple Bottom Line, while another index ranks the top 15 Economic performers, top 15 Environmental performers and top 15 Social performers.
[Image credit: Adam Freidin, Flickr]