Index of 350 biggest US companies reveals relationship between climate innovation and financial performance
GE, Ford and Alcoa are best performers
Three indexes, ranking the top 350 US companies on their climate innovation and carbon management programmes, have revealed a positive correlation between the financial performance of companies and their ability to successfully implement disruptive market innovations related to climate change.
The Climate Innovation Indexes (CIIs) are developed by Maplecroft, a leading source of global risk analysis, and include 350 US companies with a combined market cap of $3.5 trillion. Maplecroft ranked General Electric, Ford Motor Co, Alcoa Inc, Air Products & Chemicals Inc and Johnson Controls Inc as the top five performers in the CII Leaders Index of 100 companies. The CIIs identify companies that through new technologies, market strategies, partnerships and other disruptive innovations are positioning themselves to seize opportunities and deliver sustained growth in a carbon-constrained future business environment.
Maplecroft found that companies that lead in climate-related innovation also deliver higher financial performance (measured as five-year return on equity, based on Bloomberg data). This is confirmed by the performance of its CIIs, which since their launch in January continue to out-perform the S&P100 by up to 3.5%. The CIIs faired even better when compared with other well-known climate related indexes; out-performing the HSBC Global Climate Change Benchmark by up to 8.7% and the RBS Climate Change & Environment Index by up to 25.3%. The indexes combine high-sector diversification with a focus on innovation, to generate strong stock market performance. Maplecroft is now exploring opportunities to launch Exchange Traded Funds (ETFs) and other financial products based on the CIIs.
"The CIIs are a valuable tool for investors looking to pick winners, as they identify the most resilient, most innovative and best positioned companies to gain competitive advantage in the new low-carbon economy," stated Maplecroft's CEO, Professor Alyson Warhurst.
According to Maplecroft, key areas of climate innovation include technological advances in fuels, equipment and emissions monitoring, managing exposures to the impacts of climate change and creating efficiencies in energy use, business processes and transportation. Disruptive innovations, as evidenced by leading companies, go beyond incremental advances to wholly new technologies. Leading companies are also innovating through cross-industry collaborations, employee incentives and unique ways of embedding innovation as part of their core business.
General Electric (GE) retains its position as number one in this first rebalancing of the CIIs. Its innovations range from consumer-orientated (e.g. hybrid water heaters reducing domestic energy expenses by 60%) and industrial products (fuel-efficient aircraft engines) to process innovations (pricing CO2 into all deal approval processes). Ford retains its number two position with the highest score in the emissions mitigation category, following a reduction in CO2 emissions per vehicle manufactured by 24% between 2000-08. Over two thirds of Ford's operations are subject to robust energy audits that help identify opportunities for climate innovation. Mining firm, Alcoa Inc, has risen to the number three position, on account of its partnerships approach to innovation across sectors ranging from industrial (super-lightweight Dura-Bright wheels) to consumer goods (reducing laptop life cycle CO2 emissions by 50% by replacing magnesium with aluminium in laptops).
Jim O'Neill, Chairman of Goldman Sachs Asset Management confirmed: "The Maplecroft Climate Innovation Indexes make an important contribution to understanding the importance of innovation to success in the fast evolving future growth environment worldwide."
The CIIs rate each company against 100 performance based criteria. These criteria include the capacity to generate innovative new technologies or initiatives that capitalise on climate-related market opportunities; the management of climate change through policies, disclosure, targets, verification and supply chain processes; the mitigation of carbon emissions; adaptation by modelling future climate impacts and changing company operations and strategy; and reductions in overall GHG emissions. This release is the first reweighting of the indexes, which were initially launched on the BLOOMBERG PROFESSIONAL® service in January 2010.
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