The Year 2005 was an encouraging year for the sustainability investing market. Increasing investor demand – from retail to institutional asset owners – for this strategy was observed across the globe. At the same time, companies worldwide moved sustainability up their agenda to use it as a key source of competitive advantage. This is emphasized by the fact that sustainability indicators are increasingly linked to financial value drivers and integrated into Annual Reports. The corporate sustainability assessment that SAM conducted in 2005 perceived an improvement in sustainability performance across all sectors. Companies are converging in first generation sustainability themes like corporate governance. Transparency and accountability along the whole supply chain are increasingly visible through policies and control mechanisms. On the other hand, substantial room for progress in sustainability remains on the corporate agenda. One example is the area of human capital management. Although corporations widely recognize and acknowledge the importance of it for their success, this area remains an important differentiating factor. One of the issues that raised particular attention both on the corporate side as well as in the investment community in 2005 is climate change. A report prepared for the Carbon Trust and the Institutional Investors Group on Climate Change stated that “virtually all classes of pension assets have the potential to be affected by climate change”. To help better evaluate those risks and opportunities, the demand for better information about corporate greenhouse gas emissions and how companies plan to mitigate the impact of climate change, is increasing. One example is the Carbon Disclosure Project (CDP), a coalition of institutional investors with more than USD 21 trillion in assets. The project’s third report, released in 2005, showed a significantly increased awareness of climate change and disclosure of related data among US corporations. The integration of the sustainability issues into the business processes is particularly driven by the Governance, Risk, and Compliance agenda. Since the publication of the COSO II framework for enterprise risk management in September 2004, leading companies have put more emphasis on the non-financial risks and opportunities. Even more broadly, the ever increasing requirements from laws, regulations, and stakeholder expectations are calling for an integrated framework for governance, risk management, and compliance, turning it from a reactive response to becoming a value-adding principle.
The third Sustainability Yearbook, published by SAM and PricewaterhouseCoopers, takes these topics up, showing interesting background information as well as relevant SAM data. PwC presents insights from its dialogue with CEOs on Governance, Risk Management and Compliance. Moreover, the Sustainability Yearbook presents SAM’s research approach and provides portraits of 58 sectors, including data that SAM compiled in 2005.
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