Sustainable Asset Management’s 2006 Sustainability Yearbook (PDF) looks at 58 sectors, giving an analysis of their sustainability risks and opportunities, and sizing up whether individual companies are reacting. SAM then uses this research to make its own investments, as well as those on behalf of other “ethical funds”.

SAM says it has been able to show a conclusive link between performance on sustainability issues and financial performance — something of a Holy Grail for researchers in this area.

Energy Shows the Way

Three oil companies — Statoil, Woodside Petroleum and Total — come out top in the study. Both are high financial achievers and strong performers on environmental issues. In fact, SAM singles out the energy sector as a leader in environmental management.

“The data find a correlation between shareholder value creation, measured by the average return on equity generated over the last five years, and the SAM climate score,” the report says.

In assessing how well oil and gas companies are performing on the environment, SAM looks at factors such as their investment in gas and renewable energy, strategies to reduce C02 emissions and efforts to produce cleaner oil fuels.

SAM, which also manages the Dow Jones Sustainability Indexes, has published two previous yearbook reports.

The retail sector is a big mover since the 2005 report. Dominique Reber, SAM’s head of communication, says retailers have begun to address issues such as “healthy living” and how they can better treat their employees.

Supply Chain Improvements

Apparel manufacturers are also reported to have made improvements in the last year with SAM rating Adidas as the leader in the sector. The company has made positive strides on labor practices, the report says.

Across all sectors, the report says, companies have made improvements on the issue of supply chain transparency, but there is still significant room for advances in terms of “human capital management.”

The yearbook also includes in-depth analyses of three hot-button issues: climate change, “mobility” (transport) and nutrition.

SAM believes these topics, especially climate change, are likely to be increasingly part of the financial community’s analysis of sustainability-related risks. In fact, the report shows that companies have shown a marked improvement over the past few years in reporting their greenhouse gas emissions. From 24% of companies failing to provide “sufficient data” in 2002, only 12% failed last year, according to SAM’s sample.

Based in Zurich, SAM takes an approach to sustainability that looks past ethics to the risks and opportunities that ecological or social issues — such as climate change — pose to companies. It believes companies can gain competitive advantage by dealing with such issues in a proactive way.

The research, published jointly with consultants PricewaterhouseCoopers, represents one of the most complete efforts so far to compare companies, and sectors, based on their non-financial performance.

It is a showcase for SAM’s database of ten years worth of historical data from companies on their non-financial performance.

The report can be downloaded in PDF format.