Part 2 of “Screening the S&P 100 for ESG Momentum”
In Part 1 of this blog, we looked at a walkthrough of how financial advisors and portfolio managers can screen for various factors by using a spreadsheet file exported from the Truvalue Labs platform.
The S&P 100 Index was screened for event volume and narrowed to 85 constituents with a high volume of events captured by Truvalue Labs’ scraping technology.
Then the long-term Insight measure was used to narrow the field: only companies in the 40th percentile or higher for their respective industry were included. That brought the cohort is down to 37 companies.
Finally, with that cutoff for long-term performance on ESG and intangible factors done, the final hurdle was superior performance within their industries for ESG Momentum over the trailing twelve month period.
All of these top ten, seen in the screenshot above, were in the 70th percentile or higher for their industry.
Here’s a quick look at the factors that powered each company to the top of its industry, from the tenth-highest company score for ESG Momentum by industry percentile to number one.
All data seen below is taken from Truvalue Labs’ timely ESG and intangible data platform which implements SASB materiality factors within a real-time dataset.
- 10. Walmart Stores – 70.10%
Walmart’s ESG Momentum comes from improving performance for most of the past 12 months, but there’s a pronounced rise from March to April 2018. Headlines during that period included a more flexible dress code for employees, bonuses connected to federal tax cuts, and Project Gigaton, which increases the retail giant’s use of renewable energy.
- 9. Home Depot – 72.11%
Among other factors, Home Depot’s performance benefitted from the announcement of Washington, D.C.’s largest solar panel installation at a store in late May 2018. The event was scored in the SASB category of Energy Management, which is considered financially material for Home Depot’s industry.
- 8. Citigroup – 74.15%
Citigroup’s gains mostly took place nearly a year ago, in September 2017, when the firm committed to using 100% renewable energy by 2020. Since then, the long-term Insight score for the firm has slid along a plateau of the low 40th percentile for its industry. Analysts will want to carefully consider the factors that earned Citigroup its spot to determine whether fundamentals back up the metrics showing ESG Momentum outperformance. With the transparency of the Truvalue Labs platform, it’s easy to see what’s driving score changes.
- 7. BlackRock – 75.82%
For BlackRock, the catalyst for improving ESG performance seen in ESG Momentum is traceable to 1Q18. BlackRock issued a challenge to CEOs to serve a social purpose, and generated headlines like this one: “BlackRock boss Fink calls for company ESG revolution.”
- 6. Southern Company – 77.03%
Southern, the first S&P 100 member on our countdown list to breach the 75th percentile for its industry in ESG Momentum, did so with the help of an event titled “Southern Co. to be ‘low to no carbon’ by 2050, CEO says.” That event was categorized to the SASB-defined categories of Lifecycle lmpacts of Products & Services, GHG Emissions, and Energy Management. Much of the gains Southern made aren’t tied to its no-carbon pledge; this makes its trend chart a rich source of data on daily operations for analysts who perform deep-dive research.
- 5. Kraft Heinz Co. – 77.71%
Kraft Heinz presents an interesting case. Its trend chart reveals that one year ago, in July 2017, the company’s long-term Insight score lagged its benchmark, the Processed Foods industry, 53 points to 60 on Truvalue Labs’ 100-point scale. That means that much of the outperformance over the trailing twelve month period was playing catch up to its peers. That said, in January 2018 Kraft overtook its peers’ average, and jumped ahead by a few points for much of 2018, a significant move.
- 4. Costco – 79.40%
During its rise, Costco announced compostable coffee pods, a new chemicals policy, and–like Home Depot–investment in solar panels.
- 3. Berkshire Hathaway – 82.60%
Berkshire Hathaway is a special case, given its status as a diversified creation of one of the world’s greatest investors, with disparate holdings. That doesn’t mean that its trend chart doesn’t yield insights, though. Berkshire’s short-term Pulse Score hit its highest mark for the past year in May 2018 with the announcement that a Berkshire Hathaway electricity utility serving six Western states won’t build new gas or coal, instead planning to add gigawatts of wind and solar capacity.
- 2. Bank of New York Mellon – 83.68%
Sometimes ESG-related events need close inspection to understand business relevance, and other times ESG good news is just…good news. That’s seen in this November 2017 item that pushed BNY’s score higher on its upward march: “BNY Mellon Earns Perfect Score in 2018 Corporate Equality Index.”
- 1. UPS – 89.64%
In February 2018, UPS went from industry underperformer to outperformer, besting the Air Freight & Logistics industry’s 62 long-term Insight Score. The month was marked by the announcement that the shipping giant would deploy 50 plug-in electric delivery trucks that will be comparable in acquisition cost to conventional-fueled trucks with no subsidies, breaking a barrier the industry faced. Beyond that, UPS bought American trucks, and the firm that supplied them said it’s possible it could be followed up with a much larger order of 35,000 trucks.
Now that would boost any company’s ESG Momentum score!