Sustainability, Social Responsibility and Profitability Can Exist in One Utility

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Can companies that focus on sustainability and being socially responsible make for good investments? According to Target Rock Advisors LLC, they can.

Target Rock Advisors, Hauppauge, NY, offers consulting to utilities and the financial community, and it offers research, data and analytics.

For the second year in a row, Target Rock put together a Sustainable Utility Leaders Index (SULI), which is a stock index that helps guide sustainable and socially responsible investment decisions. Twenty-four utilities made the cut out of 150 publicly traded U.S.-based utilities that were scored.

That list also includes Target Rock’s overall leader, Sempra Energy, which was ranked No. 1 for the second year. Sempra Energy was recognized for excelling in operating efficiency, the quality of generated and purchased power, energy efficiency and demand side management, and emissions and emissions reporting. It also scored high in the customer, philanthropy and community investment categories. In addition, Sempra offered a high return in 2012 for investors as its shares posted a 32% return, which was the highest total return among all energy utilities in the assessed group.

To create the SULI list, Target Rock measured each company’s performance based on what it calls the triple bottom line (TBL): economics, environment and social. Each of these measures accounts for 33.3% of the overall score.

Within these three elements, Target Advisors analyze specific elements. On its website, Target Advisors states:

“Importantly, our scoring system is designed to assess actual TBL characteristics and performance based predominantly on objective measures and uniformly reported data. We do not rely in any significant degree on company self-reported information that is not always subject to independent verification and/or standardization. Thus, our numeric scores indicate what a company has actually done, not promises of things to come.”

The scoring also takes into account financial indicators that demonstrate whether a company can drive solid, sustainable financial performance while leading on environmental and social issues, according to the company.

“We see the opportunity for a more fiscally conservative population to invest in companies that can produce good income-rich total returns in the long run, while keeping volatility and risk at appropriate levels,” Kyle Rudden, partner and co-founder of Target Rock, said in a release about the rankings. “We believe the SULI index provides an excellent reference point for income-oriented sustainable and socially responsible investing.”

During the past 10 years, utilities that successfully manage their TBL have had stocks that outperform other utilities and the S&P 500, according to the company’s announcement.

Target Rock did not mention how many of the 24 utilities that it recognized on its 2013 Sustainable Utility Leaders Index (SULI) were its clients, but considering what appears to be a rigorous scoring system, I’m inclined to believe that this is an in-depth and rigorous selection process.

So, who made the list? Here they are in alphabetical order:

  • ALLETE Inc.
  • American Electric Power Co. Inc.
  • Avista Corp.
  • Consolidated Edison Inc.
  • Dominion Resources Inc.
  • Duke Energy Corp.
  • Edison International
  • Entergy Corp.
  • Exelon Corp.
  • IDACORP Inc.
  • MGE Energy Inc.
  • NextEra Energy Inc.
  • Northeast Utilities
  • NV Energy Inc.
  • PG&E Corp.
  • Pinnacle West Capital Corp.
  • Public Service Enterprise Group Inc.
  • Sempra Energy
  • Southern Co.
  • TECO Energy Inc.,
  • Unitil Corp.
  • UNS Energy Corp.
  • Wisconsin Energy Corp.
  • Xcel Energy Inc.

Target Rock also recognized eight of these utilities as sustainability leaders in the large capitalization, mid-cap and small cap categories.

The companies recognized in the large cap category were:

  • Duke Energy Corp.
  • PG&E Corp.
  • Sempra Energy

Mid-cap utility winners were:

  • IDACORP Inc.
  • NV Energy Inc.
  • Pinnacle West Capital Corp.

The small cap award winners were:

  • ALLETE Inc.
  • MGE Energy Inc.
  • Unitil Corp.

A ranking such as this can be a huge coup for publicly traded utilities as they seek to attract more investors. What do you think of the rankings? Did your utility make the list? Was Sempra Energy truly the most deserving of this list or would you have ranked another utility first?