September 7, 2010
The European market for Responsible Investment is rapidly improving eastwards, reveals a new study from GES Investment Services. Polish and Russian companies are now just as good as their peers in Austria, Greece and Ireland when it comes to reporting on environmental, social and governance (ESG) issues. However, they are all still a long way from the top performers in Sweden and France.
GES Investment Services’ Polish branch has studied ESG reporting of blue chip indexes in all major European countries including Central and Eastern Europe – or New Europe, a denomination increasingly preferred in the region. 29 indexes were analysed, each of them comprising 6-40 of the largest companies by market capitalisation on each market, with the exception of the FTSE 100 index where the 100 largest companies were taken into account. In addition, GES also included the RESPECT Index (a Polish CSR index) and the mWIG 40 index (index of midsized Polish companies).
Altogether a total of 746 companies were assessed according to GES Risk Rating criteria, which are based on international norms for ESG issues. Summing up the separate E, S and G ratings for each company, five clusters of ESG performance in Europe could be identified:
1. Leaders – OMX Stockholm 30 (Sweden) is top performer, followed by CAC 40 (France), AEX 25 (Netherlands), FTSE 100 (UK), DAX 30 (Germany), OMX Helsinki 25 (Finland), IBEX 35 (Spain) and SLI 30 (Switzerland);
2. Relatively high level – OMX Oslo 20 (Norway), OMX Copenhagen 20 (Denmark), BEL 20 (Belgium), FTSE MIB Index 40 (Italy) and PSI 20 (Portugal);
3. Slightly less than average – ATX 20 (Austria), ISEQ 20 (Ireland), RESPECT (Poland), FTSE Athex 20 (Greece), PX 14 (Czech Republic), OMX Russia 15 and WIG 20 (Poland);
4. Below average – BUX 13 (Hungary), SBITOP 6 (Slovenia), mWIG 40 (Poland), OMX Baltic 10 (Estonia, Latvia and Lithuania) and the ISE 30 (Turkey);
5. Laggards – CROBEX 25 (Croatia), SOFIX 20 (Bulgaria), BET-XT 25 (Romania) and BELEX 15 (Republic of Serbia).
Martin Pitura, Managing Director of GES Investment Services Poland, commented: “While the top indexes take a clear lead, the crowd around average rating offers an interesting forecast about the development in the rest of Europe. Indexes from New Europe are close to catching up on ESG reporting with indexes coming from Austria, Greece and Ireland, and the Polish RESPECT index even slightly exceeds the Greek FTSE Athex 20 index. It should also be noted that the gap between the third and fourth cluster is quite small, especially for the indexes from Hungary and Slovenia.”
Splitting the results for E, S and G, best performers on the Environmental pillar are companies present on OMX Stockholm 30 (Sweden), followed by CAC 40 (France) and DAX 30 (Germany). OMX Stockholm 30 is also the top performer on the Social pillar, followed again by CAC 40 but with IBEX 35 (Spain) in third place. On the Corporate Governance pillar, the leading companies can be found on FTSE 100 (UK), SLI 30 (Switzerland) and AEX 25 (Netherlands).
Martin Pitura concluded: “The Corporate Governance pillar in some indexes in New Europe is quite competitive. The difference between the best performing index in Europe, FTSE 100, and the best performing indexes in New Europe, WIG 20 and RESPECT, is not that large. The difference in Environmental and Social performance between New Europe and the rest of Europe is however quite large.”
“This is something that New Europe is working on and the improvement during the last ten years has been quite good. Our estimation is that the current leaders in New Europe were on the same level ten years ago as the current laggards in Europe are today. For the coming years, we expect to see that companies from New Europe continue to improve their ESG reporting, which will make them more attractive for investors.”
Read the report: ESG reporting in New and Old Europe
For more information, please contact:
Martin Pitura, Managing Director, GES Poland, and CFO, GES International