Progressive Investor Sample Article

2009 SB20 Issue: The World's Top Sustainable Stocks

Issue 64: June/July 2009

Introducing ... The SB20 2009
8th Annual World's Top Sustainable Business Stocks

Even in a Recession, Companies Progress toward Green Economy

This is the 8th year for the SB20, the World's Top Sustainable Stocks. As in past years, we worked with a group of judges who are leading green stock analysts to select the companies.

The purpose of the SB20 - the Sustainable Business 20 - is to showcase innovative, model companies that are leading us toward our ultimate goal of reaching a green economy.

The challenge we give our judges is to nominate, discuss and then vote on 20 companies that, through their products or initiatives, have made substantial contributions over the past year. 

This year, the judges were tasked with the proposition of selecting companies that are progressing even during this recession.  

To be on the list, companies must be strong on both the sustainable and financial sides. It is not a "buy" list, but because the companies are strong financially, their stock may well be worth be buying at some point based on stock market positioning. We strive to choose companies of various sizes, industries and parts of the world, but the list isn't meant to constitute a diversified portfolio.

If it's not a "Buy" List, then why do we do it?

Although there's no shortage of information on the environmental performance of companies, it remains scattered and difficult to find. Few people have the time or interest to plow through sustainability reports of thousands of companies, yet we receive requests from the media, financial advisors and individual investors, NGOs, research firms and others asking us which are the top companies and how to differentiate among them.

It's hugely important that companies that stick their necks out feel appreciated for their work. While it's easy to make small improvements and send out press releases, it's exceedingly difficult to literally transform the way a business operates - the products they make, how they distribute them and how they dispose of them - which is what we're asking them to do.

Many of the "corporate pioneers" depend on us to get the word out on what they do on an-going basis - the really tough work of measuring and reducing carbon emissions, using lifecycle analysis to design products, working with suppliers to meet their green criteria, reducing toxics in products, etc. Much of this work isn't "newsworthy" and doesn't get covered by the press, who often doesn't have a good grasp of its importance.

Another reason we do it is to provide a contrast to the many "best company lists."  Although there are many factors that make a company stand out from its peers including governance, employee and community relations, scoring a company on many criteria at once leads to a diluted results. A company can be mediocre on environment performance but excel on community relations and still get high marks, for example. Also, many lists focus on the largest companies, mostly in the U.S. 

Over the years we've found the exercise of choosing only 20 companies enables us to zero in on the truly outstanding companies that stand head and shoulders above the crowd on environmental performance. Since we're examining a small universe of companies, we look at them in great depth. We don't select a company because it's in "solar" or is a "renewable energy developer." We always ask: what makes this company a leader? And ask hard questions, such as: Does this company have any problems in the communities it operates in?

By analyzing companies based on the deep knowledge and experience of our judges, rather than by using numerical formulas, we're able to choose small, medium and large companies from every region of the world. So here's how we do it and who we do it with:

The Judges

Our judges are some of the most respected green analysts in the world:

Rafael Coven, Managing Partner, Cleantech Indices LLC
Matt Patsky, Managing Partner, Winslow Management Company
Elizabeth Levy, Research Analyst,  Winslow Management Company
Jules Frieder, Environmental Analyst, Calvert Group
Ton Rennen, Senior Sustainability Analyst, Triodos Bank NV
Arthur van Mansvelt, Sustainability Analyst, Triodos Bank

Rafael Coven is Managing Director of Cleantech Indices (CTIUS), which tracks the market performance of 78 leading publicly traded cleantech companies worldwide. It is available in the U.S. as a PowerShares ETF (PZD) and in Israel (KSCUS.15).

Jules Frieder joins us from Calvert Investments, a leader in the field of sustainable and responsible investing (SRI) for over 25 years.  As of June 22, 2009, Calvert Investments had $12.9 billion in assets under management in 58 funds, 23 of which integrate corporate sustainability and responsibility research.

Disclaimer: Jules Frieder's participation and views expressed are her own and not necessarily those of her employer, Calvert, and they should not be interpreted as an endorsement, recommendation, or approval of any individual or organization nor as investment recommendation to buy, sell, or hold any particular securities.

Matt Patsky manages portfolios and Elizabeth Levy analyzes companies for investment firm Winslow Management Company.  Winslow has been a pioneer in green investing since 1983, and it advises the Winslow Green Mutual Funds, which include the small cap Winslow Green Growth Fund and the mid-cap Winslow Green Solutions Fund.

Ton Rennen and Arthur van Mansvelt join us from Triodos NV- one of the world's few completely sustainable banks, located in The Netherlands. In addition to banking services, Triodos manages green private equity funds, microfinance funds and several mutual funds.

The Table below presents our SB20 List for 2009 in alphabetical order. You can see the SB20 List for the past three years here.

The 2009 SB20 List

There are two categories of companies: 

Green Pioneers: companies that produce green products/ services, such as solar and wind;
Corporate Pioneers: companies that produce conventional products/ services that are greening their operations and product lines, such as electronics and pharmaceuticals.

The judges consider these questions when they nominate companies:

* Is the company a leader in sustainability that others can look to as a model?
* Is the company meeting aggressive targets and setting new ones?
* Is the company having or has the potential to make a big impact?
* Does the company stand out from its peers?
* Is the company profitable or on a clear path towards profitability?

After they select the leading companies, we look at the list as a whole and choose a mix of companies in terms of  size, industry sector, and region of the world.

Although we mostly discuss the environmental side of the sustainability equation, most, if not all of the companies also stand out on the social side. If there are problems on the social side, a company doesn't make the final cut.

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