Driving long-term value creation

The annual rebalancing of the Dow Jones Sustainability Indices (DJSI), the most famous benchmark for corporate sustainability in the world, took place on September 8th 2016. With nearly 2,000 companies analyzed currently and another nearly 2,000 to be analyzed in RobecoSAM’s 2016 Corporate Sustainability Assessment (CSA), it is clear that sustainability is no longer something “nice to have,” but rather a necessity in order to remain cutting-edge. Likewise, the growing number of requests for new indices proves that there is appetite for fresh products among investors. At the core of this positive trend is the recognition that long-term sustainability factors are the key to long-term value creation. This has set the stage for exciting new developments.

S&P Long-Term Value Creation Index
RobecoSAM had the opportunity to work together with the Canada Pension Plan Investment Board (CPPIB) a leading supporter of the long-term investing movement. The belief that sustainability is by definition something that can and will play out over a long time horizon also attracted the interest of S&P Dow Jones Indices. The result was the S&P Long-Term Value Creation Index, an innovative product that has garnered much investor attention. This index focuses not only on the long-term financial viability of a company, but also on its sustainability performance.

New questions
RobecoSAM introduced a number of new questions to its CSA in 2016, including questions on the sources of long-term value creation, how goals are aligned with remuneration, and how transparent companies are in discussing progress towards sustainability goals. These new questions, found within the new “Materiality” criterion, were the product of discussions about what the sources of long-term management creation really are.

Impact measurement
Another area of development in this year’s CSA was impact measurement. While the term has gained traction within the investment community, impact measurement is often backward-looking. Thus, the “Impact Measurement & Valuation” criterion introduced in the CSA rests on major global drivers such as the United Nations Sustainable Development Goals (SDGs). These goals provide companies and investors with a compass to steer their sustainability initiatives towards global challenges. RobecoSAM regards these goals as essential for companies to ensure that they are generating value for all stakeholders. As investors also begin to align their strategies towards the UN SDG’s, companies that can demonstrate they are thinking long-term will have the upper-hand.

Looking back over 2016, we can see that progress has been made to encourage long-term strategies among companies and investors. But more work needs to be done. With new products like the S&P Long-Term Value Creation Index, the JPX/S&P CAPEX & Human Capital Index, the S&P DJI Fossil-Fuel Free index series and the Dow Jones Sustainability Indices, we have taken steps towards offering investment opportunities focused on long-term sustainability themes. RobecoSAM believes that creating long-term value and solving the world’s biggest sustainability challenges are not things that should be tackled in isolation, but rather tackled at both ends, where investors and companies each do their part to ensure a viable future.

Legal Information: The information and opinions contained in this publication constitutes neither a solicitation, nor a recommendation, nor an offer to buy or sell investment instruments or other services, or to engage in any other kind of transaction. RobecoSAM AG and its related, affiliated and subsidiary companies disclaim all warranties, expressed or implied, including, but not limited to, implied warranties of merchantability and fitness for a particular purpose. In no event shall RobecoSAM AG and its related, affiliated and subsidiary companies be liable for any direct, indirect, special, incidental or consequential damages arising out of the use of any opinion or information expressly or implicitly contained in this publication. © 2016 RobecoSAM AG.

The posts on this blog are opinions, not advice. Please read our disclaimers.

Leave a Comment

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>