Strong showing for UK on Dow Jones eco-index

Some €2.8 billion of investment is now tied to the world-wide Dow Jones sustainability index (DGSI), up by around 30% from a year ago. UK companies maintain a strong showing, taking the listing's second-largest national share.

The sustainability indices were launched in 1999 to identify leading companies according to how they manage environmental, social and economic issues. The DGSI World index lists the best-performing 10% of the 2,500 biggest firms on main Dow Jones index, while the DGSI STOXX index identifies the best 20% of companies across Europe.

Some €2.8 billion is now held in funds licensed to use the Dow Jones sustainability indices - up by nearly 30% from €2.2 billion last year, according to the latest review.1

The new index membership, applying from September, includes prestigious awards for the leading companies. This year BP has lost its top place in the energy sector to Norway's Statoil. But AMEC has become the leading construction firm, joining other market-leading UK firms - Marks and Spencer, BT, Severn Trent, British Land, Philips Electronics and Unilever (see table).

The main body of the world index simply lists companies without grading their performance. UK firms form around a quarter of all those listed - down slightly from last year but still second only to the US, which accounts for around 35% of the total (ENDS Report 344, p 9 ). Japan is the third best represented, forming over 7% of the total, followed by Switzerland, Germany, France and the Netherlands.

These figures, however, say as much about the relative numbers of public companies in different countries as they do about their levels of engagement with sustainability issues. Perhaps a clearer indication of the latter can be gleaned by comparing the number of companies listed on the sustainability index with those represented on the main Dow Jones index.

On this basis British, Swiss, French, German and Dutch companies are making a disproportionate appearance on the sustainability index - indicating high national standards. On the other hand, US and Japanese companies are under-represented - indicating lower standards.

Yet SAM Indexes, which assesses the companies, maintains that Japanese firms are leading in environmental management and performance, while European companies are setting best practice in environmental and social reporting.

On a sector-by-sector basis, the greatest numbers of companies came from the banking, healthcare, industrial goods and technology sectors.

Eight UK companies are newly added to the world index: AMEC (construction), Berkeley Group (home builders), Friends Provident (insurance), HBOS (banking) Imperial Chemical Industries, Premier Farnell (industrial products), Stagecoach Group (transport) and Yell Group (media).

However, four British firms dropped off - United Utilities, Balfour Beatty, Matalan and Jarvis. Their slippage is likely to be linked to increased sustainability competition from abroad rather than a deterioration in their own performance.

SAM's assessment of companies was based on responses to a questionnaire, assessment of media and stakeholder perceptions and visits to firms.

Environmental, economic and social aspects carried roughly equal weight in the assessment criteria, about 40% of which were industry-specific and 60% were generic. However, the actual weighting differed between the different sectors "to reflect the sector's specific exposure to sustainability trends".

Some industry-specific criteria have been amended since last year. For example, the chemicals sector is now being assessed on its adoption of product stewardship policies, while the biodiversity policies of construction, mining and energy companies are now being more thoroughly scrutinised.

SAM researchers highlight several positive trends. For example, companies are increasingly addressing supply chain management by setting environmental and social standards for suppliers and checking compliance with audits. Sustainability reporting is increasingly being integrated in annual reports, with increasing use of external verification and internal assurance systems.

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