Three investment themes for 2023
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The world today is increasingly interconnected. Companies can no longer connect only with investors and shareholders, they must also connect with employees and consumers. To achieve this, many companies are focusing on company culture and on investing in innovation and sustainable business practices.
International think tank Ethisphere Institute recently published a list of the most ethical companies in the world* – culled from nominations and chosen based on a comprehensive investigation of a company’s culture and practices. The Institute’s proprietary rating system is comprised of 35% ethics and compliance program, 20% culture of ethics, 20% corporate citizenship and responsibility, 15% governance and 10% leadership and reputation.
When going through the list of 2019 honourees – all 128 of them – it was clear that many of the companies also rake in some serious revenue. According to their own research, “this year’s cohort of publicly traded honourees outperformed the U.S. Large Cap Index by more than 10 percent over three years, and by almost 15 percent over five years. This “Ethics Premium” data draws a strong correlation between culture, community engagement, governance practices, and financial performance.”
Once companies start doing good, consumers take note and you might just make some money. So in no particular order, here are ten companies doing good and the Elite Rated funds that hold them.
‘It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.’ – Warren Buffett, CEO of Berkshire Hathaway and “investment guru”
A Fortune Global 500 company and holding in BMO Responsible Global Equity**, Accenture has a strong history of corporate governance and, in January 2019, set a global goal to achieve a gender-balanced workforce, with 50 percent women and 50 percent men, by 2025. It also plans to grow its percentage of women in managing-director roles to 25 percent worldwide by 2020***.
Kyosei is a Japanese word that means living and working together for the common good. It’s also Canon’s corporate philosophy. A holding in Man GLG Japan CoreAlpha**, Canon’s range of cameras offers everyone a chance to tell their story and its commitment to sustainability means it’s continually thinking about its impact on the environment. In September the company was also awarded the EcoVadis gold rating, for a fifth consecutive year, which puts the company within the top 5% for sustainability performance.
Ecolab, a top ten holding in both Pictet Global Environmental Opportunities** and Rathbone Global Sustainability**** fund, is the global leader in water, hygiene and energy technologies and services. At the time of writing, their technologies combined have saved 171.4 billion^ gallons of water this year – the equivalent to the yearly drinking water needs of more than 592.7 million^ people.
A Swedish company which provides radiation therapy, radio surgery and clinical management for the treatment of cancer and brain disorders. Elekta, a top holding in T. Rowe European Smaller Companies Equity**, is an excellent example of diversity at the highest level with the board comprised of 37% female, compared to almost 29%^^ of FTSE 100 board positions held by women.
Arthur J. Gallagher & Co. is an international service provider, providing property/casualty insurance and risk management services. It’s a holding in M&G Global Dividend**. ‘The Gallagher Way’ are shared values penned by then Chairman Robert E. Gallagher in May 1984 are the rock foundation of the company and its culture. Examples include “we can all improve and learn from one another. Empathy for the other person is not a weakness. We adhere to the highest standards of moral and ethical behaviour.”^^^
Household name, Hewlett-Packard, aims to lead a sustainability revolution fuelled by technology. From creating a world without waste, to having the most diverse^^^^ Board of Directors of any U.S. technology company and being among the top technology companies for women in executive positions. A top holding in Schroder Global Recovery*^, HP recently expanded their efforts to reduce ocean plastics with a $2m investment in plastic washing line in Haiti, which will help it produce cleaner, higher quality recycled plastic locally for use in HP products. It will also create more than 1,000 new income opportunities locally.
One of the world’s largest cosmetics companies and holding in Threadneedle European Select*^, L’Oréal is the fourth most gender-balanced company in the world according to Equileap’s 2019 ranking and second in Europe. L’Oréal is also a founding parent of Women4Climate, an initiative aimed to empower and mentor young women who develop projects addressing climate change in their home city.
NextEra Energy is the world’s largest producer of wind and solar energy. It’s also one of America’s largest capital investors in infrastructure, with between $50 and $55 billion in new infrastructure investments planned through 2022. A holding in First State Global Listed Infrastructure**, NextEra Energy is committed to respecting the environment, sustaining communities and investing in its team by creating thousands of high-paying jobs. It has also rewarded investors with a 770% total shareholder return over the last 15 years.**^
Celebrating its 20th anniversary this year, Salesforce is a cloud-based software company and the world’s #1 customer relationship management platform. Clients include Aston Martin, Unilever and Ocado to name a few. A top holding in AXA Framlington Global Technology*^, Salesforce works with policymakers around the globe, including Singapore, Iceland and Germany, on issues that impact employees, customers, and the environment.
A holding in Fidelity Global Special Situations** fund, T-Mobile is one of only four honourees in the telecommunications industry to receive the award. T-Mobile has committed to move to 100 percent renewable electricity by 2021 – no small task as it reportedly uses roughly 3 million megawatt hours (MWh) to power its stores, headquarters, cell towers, and more.***^
*Source: Ethisphere Institute, World’s most ethical companies, leading practices and trends research report.
**Source: fund factsheet at 31 Oct 2019
***Source: Accenture publishes latest U.K. gender pay gap figures, 18 Jan 2019
****Source: FE Analytics, as at 31 Oct 2019
^Source: Ecolab, customer impact counter, 19 Nov 2019
^^Source: Record number of women on FTSE 100 boards, 8 Mar 2018
^^^Source: The Gallagher Way, May 1984
^^^^Source: HP 2018 Sustainable Impact Report
*^ Source: Fund factsheet at 30 Sept 2019
**^Source: NextEra Energy website, 19 Nov 2019
***^Source: T-Mobile website, 19 Nov 2019