Historically, evaluating investments focused solely on financial returns. However, with the growing significance of climate change, the concept of “triple bottom line” or financial, environmental, and social impact has been gaining traction. This push to look at investment decisions more holistically has given rise to ESG (Environmental, Social, and Governance) practices and policy.
ESG measures the societal and sustainability impact of every business activity. Investors are now looking to responsibly invest in companies that manage their impact on the environment and society at large. To serve this need of investors.
ESG rating agencies use analysts to measure the performance of various companies and compare them through ratings and rankings, this does not always show the full picture as the rankings can sometimes be as old as 6-12 months.
ESG Analytics is a platform that uses artificial intelligence and alternative data (data outside of corporate disclosures) to benchmark company ESG performance, this allows for more company coverage, real time insights and the ability to look beyond a score to determine whether a company meets the ESG criteria you are looking for.
We took a look at the Consumer Discretionary industry, to understand the best performers. Read on to learn how industry leaders like BorgWarner Inc, Ulta Beauty Inc, Genuine Parts Company, NVR, AutoZone Inc demonstrate a well managed company, with low ESG controversy risk.
How were these companies selected?
Each day, ESG Analytics processes millions of documents to identify and manage ESG risk using our proprietary Natural Language Processing (NLP) algorithms. Once we identify a material event, we classify it according to the industry leading SASB framework (26 different ESG topics) and then run sentiment analysis to determine how positive of negative the event is. This chart below shows the ESG Pulse of companies in the Consumer Discretionary sector. For accuracy, we excluded companies that did not meet a minimum threshold of events.
Here's the full list:
1. BorgWarner Inc
BorgWarner Inc. provides solutions for combustion, hybrid, and electric vehicles worldwide. The company's Engine segment offers turbocharger and turbocharger actuators; eBoosters; and timing systems products, including timing chains, variable cam timing, crankshaft and camshaft sprockets, tensioners, guides and snubbers, front-wheel drive transmission chains, four-wheel drive chains, and hybrid power transmission chains.
BorgWarner Inc has a ESG Pulse of 0.96 out of 1, and has no material ESG controversies of note.
Over the last year, BorgWarner's Intelligent Cam Torque Actuation (iCTA) has improved Fuel Economy and Reduces Emissions.
2. Ulta Beauty Inc
Ulta Beauty, Inc. operates as a beauty retailer in the United States. The company's stores offer cosmetics, fragrances, skincare and haircare products, bath and body products, and salon styling tools; salon services, including hair, skin, makeup, and brow services; and others, including nail products and accessories.
Ultra Beauty lands an ESG Pulse of 0.94 out of 1, and has a low amount of contraversies.
There is virtually no identifiable controversy risk for the company, and this is echoed by other external providers with a score of 16 from Sustainalytics and a BBB from MSCI.
3. Genuine Parts Company
Genuine Parts Company distributes automotive replacement parts, industrial parts and materials, and business products in the United States, Canada, Mexico, Australasia, France, the United Kingdom, Germany, Poland, the Netherlands, and Belgium. The company distributes automotive replacement parts for imported vehicles, hybrid and electric vehicles, trucks, SUVs, buses, motorcycles, recreational vehicles, farm vehicles, small engines, farm equipment, marine equipment, and heavy duty equipment; and accessory items for automotive aftermarket, such as repair shops, service stations, fleet operators, automobile and truck dealers, leasing companies, bus and truck lines, mass merchandisers, farms, industrial concerns, and individuals.
Genuine Parts Company has an ESG Pulse of 1 out of 1, and is not included in any negative screens.
This pulse score highlights an extremely low controversy risk, and a well managed company from an ESG perspective.
4. NVR, Inc
NVR, Inc. operates as a homebuilder in the United States. The company operates in two segments, Homebuilding and Mortgage Banking. It primarily constructs and sells single-family detached homes, townhomes, and condominium buildings under the Ryan Homes, NVHomes, and Heartland Homes names. The company markets its Ryan Homes products to first-time and first-time move-up buyers; and NVHomes and Heartland Homes products to move-up and luxury buyers.
NVR's ESG Pulse is 0.96 out of 1 over the last year, a standout performer using ESG Analytics AI based methodology.
5. AutoZone Inc
AutoZone, Inc. retails and distributes automotive replacement parts and accessories. The company offers various products for cars, sport utility vehicles, vans, and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories, and non-automotive products.
AutoZone's ESG Pulse is 0.96 out of 1 over the last year, indicating a well managed public profile, free of ESG controversy.
There is virtually no identifiable controversy risk for the company, and this is echoed by other external providers with a score of 12 from Sustainalytics and a BBB from MSCI.