Industrial, real estate, and consumer discretionary companies dominated Barron’s new annual list of the most sustainable foreign companies.
Based on data and analysis from Calvert Research and Management, a unit of Eaton Vance owned by Morgan Stanley, Barron’s recently published its fifth annual list of the 100 Most Sustainable U.S. Companies. Using the same methods, Calvert looked into 1,000 largest public companies by market cap in 26 developed markets outside the U.S. and ranked them based on scores across five key areas of sustainability—shareholders, employees, customers, community, and the planet.
The 20 most sustainable non-U.S. companies, according to the list, have an average score of 76, higher than the 73 for their U.S. counterparts. Both groups have improved from last year, when they scored 72 and 70, respectively.
The international group has seen their stocks return an average of 29.2% in 2021. In comparison, the iShares MSCI EAFE exchange-trade fund (ticker: EFA), which tracks more than 800 large- and mid-cap companies across developed markets, gained 11.5% during the same period.
European companies, long at the forefront of global ESG movements, dominated the list. This is a reflection of the region’s stricter regulatory and disclosure requirements, as well as the more mature framework to channel investor capital to sustainable companies, says Chris Madden, managing director and co-director of Index Management at Calvert.
The list is disproportionately represented by just a few sectors: Six in industrial, five in real estate, four in consumer discretionary, the rest in utilities, material, and financial.
“We are seeing a lot of strong energy plays on the list,” says Madden.
Barron’s 20 Most Sustainable Non-U.S. Companies 2022
|2022 Rank*||2021 Rank||Company||Ticker||Sector||Weighted Score||2021 Return||Market Capitalization (bil)**||Price to Earnings**|
|7||NR||Mirvac Group||MGR.AU||Real Estate||76||7.5||6.9||10.9|
|8||NR||Nippon Prologis REIT||3283.JP||Real Estate||76||16.1||8.1||42.7|
|9||NR||Burberry Group||BRBY.UK||Consumer Discretionary||76||3.6||10.0||15.9|
*Rank based on non-rounded weighted average; **Market cap and P/E ratio as of 12/31/2021; NR=not on the 2021 ranking; N/A= not available
Sources: Calvert Research & Management
Red Electrica (REE.Spain), the top-ranking Spanish utility firm, for example, has been moving to use more renewable energy to power its electricity system. The company has cut its scope 1 and scope 2 carbon emissions by nearly half since 2015, and made even more ambitious targets for the coming years.
No. 2 on the list, French real estate firm Gecina (GFC.France), has been renovating its existing and occupied buildings to reduce energy consumption. The firm has cut its carbon emissions by 41% over the last 5 years, three times faster than the sector average in France. It aims to achieve net-zero by 2030.
The key challenge is to deploy innovative technology combined with human consideration, CEO Méka Brunel tells Barron’s in an email. The firm aims to promote biodiversity at its properties, contribute to the creation of green grids, and preserve local flora and fauna. All of these efforts would not only lead to lower carbon but also improve the quality of life of the occupiers.
The No. 3 to 5 are real estate investment firm Stockland (SGP.Australia), chemical conglomerate Koninklijke DSM (DSM.Netherlands), and renewable-energy utility EDP Renovaveis (EDPR.Portugal).
Another notable group on the list are familiar consumer brands such as luxury fashion house Burberry (BRBY.UK), footwear specialist Puma (PUM.German), and jewelry maker Pandora (PNDORA.Denmark).
The apparel industry––often with manufacturing factories in less developed areas—has traditionally been a heavy user of water and prone to risks of toxic waste discharge and unfair labor practices.
The companies on the list have demonstrated strong supply chain management from both environmental and social perspectives, says Madden. For example, Burberry and Puma are members of the Better Cotton Initiative, and Pandora committed to only use recycled gold and silver for its jewelry by 2025.
This is the third year that Calvert produced the international ranking for Barron’s, and companies on the list have changed a lot from the previous years. Only six out of the top 20 this year were also on the 2021 list, and three were on the 2020 list. That’s partially because Calvert has included real-estate investment trusts to the pool this year and added Taiwan and South Korea as developed markets.
The newcomers immediately took over some slots: Five of the most sustainable non-U.S. companies are REITs, Taiwanese shipping company Evergreen Marine (2603.Taiwan) has also made it to the list. Among the top 20, only two firms have appeared on the list in all three years since 2020—French hotel operator Accor (AC.France) and Australian logistics firm Brambles (BXB.Australia).
Many companies that are pushed off the list this year are just below the 20th rank, according to Madden. “It’s not that there was a significant downgrade for these firms,” he says, “It’s just that leaders can’t just stay leaders. There are a lot of companies that really take sustainability issues with importance, everyone is improving dramatically.”
Write to Evie Liu at email@example.com
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