Morley Fund Management (Morley) today releases its first Sustainability Matrix. This Matrix ranks FTSE 100 companies according to social and environmental criteria and provides a new measure of business sustainability. These gradings:
Encourage companies to improve their Social and Environmental Performance
Protect and increase Shareholder Value by adding another tool for the analysis of companies
For the first time provide clear and transparent analysis of companies’ social and environmental policies
Encourage and stimulate debate and continue raising awareness of Corporate Social Responsibility
Keith Jones, CEO at Morley Fund Management, says:
"Morley increasingly believes that companies operating in a socially and environmentally responsible manner will be most likely to succeed over time. Our Sustainability Matrix breaks new ground in promoting improved performance. It focuses on engagement with management and provides transparent information for investors. By encouraging companies to improve their sustainability rating we aim to protect and enhance shareholder value."
These ratings are the outcome of over a year’s in-depth research of the FTSE 100 companies by Morley analysts. The Matrix ranks companies according to Business Sustainability and Management Vision and Practices
Business sustainability is rated from A to E. An A grade is awarded to companies providing a ‘sustainability solution’ to major environmental or social issues – such as renewable energy, healthcare and education. An E grade indicates a business fundamentally incompatible with sustainable development. Companies such as GlaxoSmithKline (A2), BG (B2), United Utilities (B2) and Pearson (A3) all gain strong grades on product sustainability.
Management vision and strategy is graded from 1 to 5. Companies awarded a grade 1 have a clear vision of sustainable development and are actively working to achieve it. The poorest grade, 5, denotes management policies and practices incompatible with sustainable development and the concept of corporate responsibility. BP (D2), Shell (D2) and Allied Domecq (D2) gain strong gradings for management, vision and strategy. No FTSE 100 company gains a 1 or 5 grade.
Morley uses the Matrix ratings as a basis for engagement with companies to encourage improvement and as a tool to select companies for inclusion in the Morley Sustainable Future Funds. (The stocks in the shaded grey areas can be held in these funds).
Clare Brook, Director of the SRI team at Morley outlines how the Matrix supports the team’s future investment strategy:
"Many companies now recognise the long term financial risks they face by ignoring environmental and social impacts, but believe the City to be entirely uninterested in sustainable development. Publishing the Matrix will contribute to the debate on the compatibility between economic prosperity and sustainable development. It demonstrates for the first time, that the City has a vested interest in working with companies to develop an economic model where sustained returns are rooted in sustainable development."