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Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
Socially Responsible Investing: Corporate Citizenship and ...
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Socially Responsible Investing: Corporate Citizenship and ...

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  • 1. Socially Responsible Investing: Corporate Citizenship and Wall Street Meet How Ford Motor Company is Evaluated and Viewed
  • 2. Corporate Citizenship Through an Investor’s Eyes “…is a business approach to create long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental, and social developments.” - Dow Jones Sustainability Group Index
  • 3. Corporate Citizenship Through an Investor’s Eyes “One of our guiding principles is that the best long-term investment opportunities are to be found among companies that are financially sound and are committed to meeting the challenges of today and the future with an expanded view of corporate responsibility.” - Barbara Krumsiek, President & CEO of Calvert Group
  • 4. Companies outperforming on corporate citizenship… • Secure a long-term license to operate by responding to stakeholders’ changing needs • Use resources in more efficient and economic manner • Deliver more predictable results, with fewer negative surprises • Likely have other sound management practices (environmental/ social management is proxy for overall quality of management) • Look to create wealth among a broad set of stakeholders, increasing market awareness and access to new markets • Demonstrate increased transparency and offer more perfect information, financial and otherwise
  • 5. Socially Responsible Investing • More than $2 trillion in assets in socially and environmentally responsible investments in U.S. – Grew from $1.185 trillion in 1997 to $2.16 trillion in 1999 – Growth outpaced broad market at twice the rate • One out of every eight dollars under professional management in U.S. is part of SRI portfolio – SRI accounts for 13% of $16.3 trillion – One in nine investor households have SR investment • Negative screens are giving way to “best in class”
  • 6. Socially Responsible Investing SCREENS AND RETURNS: 10 LARGEST U.S. SRI FUNDS Fund Name Inception Assets Annual Average % Date ($m) 1 year 3 year 5 year 10 year Domini Social Equity 6/3/91 1,299 -19.4 2.6 14.2 14.5 Pax World Balanced Fund 8/10/71 1,234 -1.3 9.5 14.2 11.3 Dreyfus Premier: Third Century 3/29/72 989 -27.3 1.9 12.7 12.2 Calvert Social-Balanced A 10/21/82 600 -5.9 2.6 9.3 9.0 Ariel Appreciation 12/1/89 530 30.6 10.7 19.1 14.6 Citizens Core Growth Fund 3/3/95 473 -28.4 2.0 14.5 - Ariel Fund 11/6/86 396 27.0 9.8 17.3 13.9 Parnassus Fund 5/2/85 373 -16.8 19.4 17.7 16.5 Citizens Emerging Growth 2/8/94 294 -37.5 15.7 16.5 -
  • 7. The Context Demand information Rating Investors Provide Agencies information Investor Reporting interest Surveys, growing interviews Companies
  • 8. On what criteria are we judged? • Vision and Commitments • Management Quality • Multi-Dimensional Performance – Financial, Economic, Environmental, Social – Across value chain • Reporting Commitment / Policy
  • 9. What sources of information are used? • Annual reports – Financial reports – Sustainability or corporate citizenship reports – Verification emerging as important • Questionnaires/surveys • Management interviews • Internet scans • Media stories • NGO opinions
  • 10. Companies evaluated by different groups • The Center for Responsibility in Business (formerly CEP) • Sustainable Asset Management (SAM) – Dow Jones Sustainability Group Index (DJSGI) • Innovest • Investor Responsibility Research Center (IRRC) • Kinder, Lydenberg, & Domini (KLD) • OEKOM • Storebrand • EIRIS • Others
  • 11. Research used for different purposes Examples The FTSE4Good (in partnership with EIRIS) Center some Fortune and Worth Magazine rankings Shopping for a Better World SAM Dow Jones Sustainability Group Index most often cited in Financial Times and Economist companies use for benchmarking Innovest sells data to financial analysts & institutional investors KLD Domini Social 400 Index
  • 12. Dow Jones Sustainability Group Index • “The only index which measures sustainability on a global basis’ • In-depth analysis of economic, environmental, and social dimensions • Examines risks and opportunities for strategy, management, and industry-specific issues – Analyze surveys, monitor media, solicit stakeholder input • Top 10% of industry sector selected for the Index • Selection process audited by PWC
  • 13. DJSGI Leading Companies (2000) • Ford excluded due to crisis management but “performed well” in other areas - Firestone and discrimination (human rights) issues
  • 14. Ford: Risk Criteria (2000)
  • 15. Ford: Opportunity Criteria (2000)
  • 16. Auto Industry in Perspective
  • 17. Ford DJSGI Assessment (2001) • Effective October 5, 2000 - BMW, DC, VW • Preliminary feedback on Ford: – Weaknesses: • supplier standards (social dimension) • environmental performance (manufacturing) • intellectual capital management (need to investigate further) – Scored “quite well” on other aspects, just not in top 10%
  • 18. Innovest • “Uncovering hidden value potential for strategic investors” • Primarily environmental but beginning to include social • EcoValue 21 model includes 60 environmental criteria • Conduct annual interviews approximately 1.5–3.0 hours with about 1200 companies • Well respected with impressive list of institutional investors, asset management firms, corporations • Considerable costs associated with research excludes activists
  • 19. Innovest
  • 20. Innovest
  • 21. Innovest – Ford Rating Strengths Weaknesses • AFVs, EVs, 2003 HEV Escape, ISG • “Wanting in environmental cost accounting and performance reporting” • ISO 14001 • “Promised improvements in fuel efficiency • Environment at the BoD level will be followed closely by NGOs” • Rouge project • “With Firestone tire recall, Ford’s reputation • First to drop out of GCC has been shaken”
  • 22. Innovest
  • 23. FTSE4Good • Launched in July, 2001 with widespread media coverage • Assess three dimensions: – Working towards environmental sustainability – Developing positive relationships with stakeholders – Upholding and supporting universal human rights • Four indices: – UK 50 Index (no auto manufacturers) – Europe 50 Index (BMW ranked 50th) – US 100 Index (no auto manufacturers) – Global 100 Index (Toyota ranked 16th, Honda ranked 66th) • Relies on The Center and IRRC data
  • 24. Storebrand • Analyzes environmental performance and selects top 30% of auto industry • Uses weighted average of eight sustainability indicators – Strong focus on impacts of product in use • Beginning to conduct human rights assessment – Analyze policy, operations, suppliers/partners, internal management systems & reporting
  • 25. Storebrand Evaluation GW 200 QM 150 OD 100 50 PC 0 MI WI TR EI • Ford’s Sustainability Index (weighted average) is 108; the industry average is 100. Ford qualified for the Environmental Value Fund. • Other auto companies are Fiat, VW, Honda, Toyota
  • 26. The Center for Responsibility in Business • Established in 1969, influential and long-standing, although going through rebranding and restructuring • Assign grades as part of company “report cards” • One of the more “activist” organizations • Criticized for subjective ranking process
  • 27. Report Card Disclosure Environment Minority Women's Workplace Work/Life Charitable (1999) (1999) Advancement Advancement Issues Programs Giving (1999) (1999) (1999) (1999) (1999) Ford A C A B C B 0.45% Rank Sample - N/A 41/213 101/212 82/127 64/133 - Rank Industry - 5/6 1/4 2/4 2/2 2/2 - Rank DC B B B D - - - GM A A C C A A -
  • 28. OEKOM • Weighting: 17.5% environmental management, 65.0% products & services, 17.5.% environmental performance data • European auto manufacturers rank 1-7, then two U.S. companies, followed by Japanese • Ford received a C rating and ranked 8th out of 14 – Strengths: ISO 14001, reporting – Weaknesses: sustainability risks of SUVs, poor fuel economy performance • VW, Audi, Renault leaders with B- ratings • Mitsubishi and Mazda laggards with C- and D+ ratings
  • 29. KLD
  • 30. How are we performing? • Rank in middle tier (good we are responding to requests) • Credited for vision, must deliver on promises and improve product performance – Recognized for AFVs, HEV Escape in 2003, ISG, Th!nk, SUV fuel economy commitments • Rewarded for strong environmental management systems, but environmental performance is either (1) lagging or (2) difficult to assess due to lack of data and/or lack of targets • Asked to improve social performance reporting and provide evidence of supporting management systems
  • 31. Going Forward • Explore better ways to respond to surveys – streamline responses – develop standard data set • Engage with rating agencies – better understand methodology (demand transparency) – seek commonality between surveys – ask for feedback and opportunity to respond – understand reasons for Ford scores and those of leadership companies • Collaborate with other companies and suppliers – dialogue on soundness/consistency of methodology (promote GRI) – analyze extent to which this analysis impacts investors and valuations

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