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 Utilities industry, to understand the best performers. Read on to learn how industry leaders like PPL Corporation, NextEra Energy, Ameren Corporation, CenterPoint Energy, Pinnacle West Capital Corporation 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 Utilities sector. For accuracy, we excluded companies that did not meet a minimum threshold of events.
Here is the full list:
1. PPL Corporation
PPL Corporation, a utility holding company, delivers electricity and natural gas in the United States and the United Kingdom. The company operates through three segments: U.K. Regulated, Kentucky Regulated, and Pennsylvania Regulated. It serves approximately 418,000 electric and 329,000 natural gas customers in Louisville and adjacent areas in Kentucky; 530,000 electric customers in central, southeastern, and western Kentucky; and 28,000 electric customers in 5 counties in southwestern Virginia.
PPL's ESG Pulse is 0.97 out of 1 over the last year, indicating a well managed public profile, free of ESG controversy.
Some of its recent initiatives this year include:
- PPL joins EPRI and GTI-led initiative to accelerate low-carbon energy technologies
- 2018 Corporate Sustainability Report highlights PPL's commitment to a sustainable energy future
2. NextEra Energy
NextEra Energy, Inc., through its subsidiaries, generates, transmits, distributes, and sells electric power to retail and wholesale customers in North America. The company generates electricity through wind, solar, nuclear, and fossil fuel, such as coal and natural gas facilities. It also develops, constructs, and operates long-term contracted assets with a focus on renewable generation facilities, natural gas pipelines, and battery storage projects; and owns, develops, constructs, manages and operates electric generation facilities in wholesale energy markets.
NextEra ESG Pulse is 0.99 out of 1 over the last year, a standout performer using ESG Analytics AI based methodology.
Some of its recent initiatives this year include:
- NextEra Energy is recognized as one of the World's Most Ethical Companies® for the 14th time
- NextEra Energy named to Forbes' list of America's Best Employers for Diversity for third consecutive year
This chart highlights their overall ESG Pulse by topic.
3. Ameren Corporation
Ameren Corporation, together with its subsidiaries, operates as a public utility holding company in the United States. It operates through four segments: Ameren Missouri, Ameren Illinois Electric Distribution, Ameren Illinois Natural Gas, and Ameren Transmission. The company engages in the rate-regulated electric generation, transmission, and distribution activities; and rate-regulated natural gas distribution and transmission businesses.
Ameren Corporation has an ESG Pulse of 1 out of 1, highlighting an extremely low controversy risk, and a well managed company from an ESG perspective.
Some initiatives over the last year include:
- New sustainability reports demonstrate Ameren's commitment to a cleaner energy future
- Ameren Named to the Top 10 List of 2020 Best Workplaces in Manufacturing & Production by Great Place to Work® and FORTUNE
- Ameren Missouri boosts Smart Energy Plan after completing 900 projects in first year of plan to transform energy grid to benefit customers and communities
4. CenterPoint Energy
CenterPoint Energy, Inc. operates as a public utility holding company in the United States. The company's Houston Electric T&D segment electric transmission and distribution services to electric utility. It owns 236 substation sites with a total installed rated transformer capacity of 68,053 megavolt amperes. Its Indiana Electric Integrated segment provides energy delivery services to electric customers and electric generation assets to electric customers and wholesale markets.
CenterPoint Energy lands an ESG Pulse of 0.98 out of 1, and has a low amount of controversies.
Over the last year, CenterPoint Energy sought approval for 400 megawatts of renewable energy serving southwestern Indiana.
5. Pinnacle West Capital Corporation
Pinnacle West Capital Corporation, through its subsidiary, Arizona Public Service Company, provides retail and wholesale electric services primarily in the state of Arizona. The company generates, transmits, and distributes electricity using coal, nuclear, gas, oil, and solar generating facilities.
Pinaccle West Capital Corporation has a ESG Pulse of 1 out of 1, and has no material ESG controversies of note.
There is virtually no identifiable controversy risk for the company, and this is echoed by other external providers with a score of 28.8 from Sustainalytics and a BBB from MSCI.