GovernanceMetrics International
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September 27, 2010
GMI Adds New Environmental and Sustainability Metrics to its Newly Released Ratings
Dear Colleague,
This is to let you know that GMI has just released new ratings and rating reports for our entire universe of 4207 companies.
With today’s release, GMI coverage now includes 1,893 companies from North America; 984 from Industrialized Europe; 720 from Industrialized Asia-Pacific; and 610 from Emerging Markets. The number of individual countries covered totals 45.
Environmental and Sustainability Focus
In today’s release, GMI is including 22 additional new metrics in the environmental and sustainability field to enhance our current coverage of issues in the Corporate Behavior section of ratings reports. In particular, these additional data points will go deeper into our analysis of the approach of companies to the governance of exposures to environmental issues and sustainability. These new metrics will more specifically analyze the approach of companies to risks and opportunities posed by long term sustainability. Areas such as disclosure of various environmental exposures and codes of conduct, including those relating to third party suppliers, any engagement activities, appropriate executive incentives and performance targets, and regulatory problems are covered. A full list of the new metrics is here.
Of the 22 new metrics, four have been added as Key Metrics shown in reports and in downloadable files for subscribers. These Key Metrics highlight some key areas of concern on sustainability issues. One Key Metric is public disclosure of Greenhouse Gas (GHG) emissions. The highest level of disclosure is amongst Japanese companies with GMI finding 77% of companies providing these disclosures. Overall Japan has poor governance practices, especially given its very low levels of independent directors and lack of real oversight of management. However, it is heartening to see strong disclosure on environmental issues. Amongst developed markets, the United States has one of the lowest disclosure levels at a relatively low 11%. When it comes to disclosing specific environmental exposure reduction targets, Japan once again leads at 74% followed by Denmark, Sweden and Finland. Many Emerging Markets companies fail to disclose such targets with only 10% of Emerging Markets companies doing so.
The implementation of environmental codes of conduct is also followed in our Key Metrics. Most markets have relatively lower levels of such codes compared to disclosure of GHG emissions and environmental disclosure targets. Many leading industrialized markets have relatively low levels of such codes disclosed with the United Kingdom only having 6% of companies and the US only 4%. Once again, Japan, Denmark, Sweden and Finland are amongst the world leaders in this area.
GMI will also be more closely following companies getting into behavioral difficulties on environmental issues, with a new Key Metric tracking whether a responsible party has alleged serious environmental damage and also a new Red Flag in the Corporate Behavior section for Regulatory Investigations that are specifically related to environmental issues. Currently, all regulatory investigations into non-financial matters incur the same Red Flag, but those related to environmental issues will now be directly identified.
Upon examining some of the companies affected by environmental exposures, we have found some companies are more clearly equipped to deal with these challenges than others.
For example, Amada Co., Ltd.’s global Corporate Behavior rating increased to 7.5 from 6.5 in June 2010. The Japanese industrial machinery company shows commitment to environmental protection and publicly highlights its activities in this area on its website and in its environmental report. An early adopter, the company instituted a code of environmental conduct in 1998 and has had ISO 14001 certification for its facilities since 1998. The company also discloses its greenhouse gas emissions as well as specific targets for reducing environmental exposures. In addition, the company also promotes eco-friendly products and recycling. Since 2008, Amada has held environmental management meetings with students and other community members at a local university to further its outreach on these issues.
In contrast, STX Pan Ocean Co., Ltd.’s global Corporate Behavior rating decreased to 3.0 from 2.0 in June 2010. The South Korean company is engaged in marine transportation, transporting oil tankers and cargoes such as irons, steels, minerals, and grains. Despite its clear exposure to environmental issues, STX Pan Ocean makes no environmental disclosures and does not indicate whether it employs an environmental management system. Most areas of its corporate social responsibilities are marked by a lack of disclosure and STX Pan Ocean does not publish CSR reports. In addition, in June 2009 a federal judge in Florida ordered the company to pay $2.2 million in penalties and serve four years of probation for falsifying environmental compliance records. The court also ordered STX Pan Ocean to implement a detailed environmental compliance plan, including monitoring of its fleet-wide operations for the next four years, training for crew members and engineering alterations to protect gulf and ocean waters. The company has also suffered from other Corporate Behavior problems.
Country Rankings
GMI has also released its new Country Rankings. The GMI Country Rankings is based on the average company rating for companies from markets covered by GMI where more than 10 companies are covered. The United Kingdom ranks top in the Country Rankings followed by Canada, Ireland and the United States. Leading market in Asia remains Singapore and the top Emerging Market is South Africa, where the new King III reforms are expected to further enhance corporate governance as it comes into play in the coming annual report season. Japan remains the lowest average in developed markets with the problem of limited independent oversight still prevailing. The Country Rankings can be found here.
Full Coverage of OBX (Norway) and ATX (Austria) Indexes
With this release GMI has also expanded coverage in Norway and Austria to offer complete coverage of companies in the OBX and ATX Indexes, respectively. We will also continue to cover companies in Norway and Austria that are part of the MSCI World Index, MSCI EAFE Index or the Dow Jones STOXX 600 Index.
Please feel free to contact us for additional information.