Extracting value through factor analysis

Transcription

Decomposing SRI performance
Extracting Value Through Factor Analysis
SEPTEMBER 2003
Decomposing SRI performance –
Extracting Value Through Factor Analysis
1 Introduction
3
Pictet Pictet SRI Performance
.
1
2 Method and Data
4
2.1 Sustainability Approach
4
2.2 Financial Data and Observation Period
6
2.3 Sustainable Scores (Factors)
6
2.4 Backtracking Performance Contribution of Sustainable Factors 7
3 Results & Discussion
3.1 Global Sustainability Ratings
– Level I Scores
8
8
3.2 Environmental and Social Performance
– Level II Scores
10
3.3 Social Strategy versus Stakeholder Relations
– Level III Scores
11
3.4 Suppliers, Employees, Clients and General Public
– Level IV Scores
12
3.5 Environmental Strategy versus actual Performance
– Level III Scores
15
3.6 Environmental Life Cycle: From Cradle to Grave
– Level IV Scores
16
4 Conclusion/Summary
Christoph Butz
Sustainable Investment
Pictet Quants
+41 (0)58 323 1853
cbutz@pictet.com
19
.
1. Introduction
Why yet another
study on SRI
performance?
There have been innumerable studies investigating the potential link between
socially responsible investment (SRI) and financial performance over the last
years1. So why would we want to add yet another to this long list of publications?
There are two reasons. First, sustainable investment is crucial to the concept of
sustainable development. Without financing streams being gradually redirected
towards a more environmentally and socially compatible economy, the ultimate
goal of sustainable development will never see the light of day. Therefore, any
contribution that clarifies or substantiates the financial effects of socially responsible investment is welcome. Second, and maybe more important, most of the discussions to date have focused on the link between «sustainability» and financial
performance, as if sustainability or the sustainable performance of a company
were a single entity and easy to measure. By decomposing sustainability into its
components, we can obtain valuable insights critical to sustainable asset management. The present study, therefore, decomposes sustainable performance into
its constituent parts and investigates their influence on the financial performance
of 288 listed European companies from January 1999 to July 2003.
1
See, for instance http://www.sristudies.org/ for a comprehensive bibliography on sustainability-related publications.
.
3
.
2. Method and Data
2.1 Sustainability Approach
4
SRI normally
follows bottom-up
approach
Sustainability research normally follows a bottom-up approach. Sustainabilityrelevant data is gathered and aggregated to compute an overall assessment of a
company’s environmental and social compatibility. Unfortunately, as in other
aggregation processes, information is inevitably lost on the way. While working
on an aggregate level is easily understandable and convenient for most purposes
- because there is only one overall sustainability factor to deal with - it is not necessarily so with a quantitative investment approach where the sub-elements of
sustainability are considered to be mere factors and can – theoretically – be bet
upon individually.
Environmental and
Social Performance
Most people would agree that the sustainability of a company should encompass
– besides its economic viability, which will be taken into account later - both its
environmental and its social responsibility (cf. Fig A, below).
SUSTAINABILITY TRIANGLE
Economy
“Sustainability”
Environment
Society
Fig. A. Sustainability triangle comprising the three pillars of sustainability: Economy, Environment and Society.
Sustainability
Model (the PSVC
Pyramid)
We therefore adopt this approach and decompose the final rating into two distinct scores: One for the environmental and one for the social performance. We
call these level II scores in what follows. Fig. B below illustrates the hierarchical
structure and the subdivision into further scoring levels. This underlying sustainability model has been developed by Pictet and is used for all our sustainable
investment products. It is also referred to as the Pictet Sustainable Value Chain
(PSVC).
.
OVERVIEW OF THE SUSTAINABILITY MODEL USED
5
Scoring level
I
II
III
IV
Global Sustainability Score
Environmental
Value Chain
Social Value Chain
Environmental
Strategy
Life Cycle
Social
Strategy
Stakeholder
Environmental
Management
Sourcing &
Suppliers
Social
Management
Employees
Environmental
Policy
Production
Processes
Social
Policy
Suppliers
Environmental
Reporting
Products
& Services
Social
Reporting
Shareholder
Public/NGOs
Clients
Fig. B. Overview of the sustainability model used. The Global Sustainability Score on the apex of the pyramid is broken
down consecutively into 4 different scoring levels.
Breaking down
the Environmental
Value Chain
Environmental compatibility or the «Environmental Value Chain» can then be further broken down into a strategic part on the one hand (Environmental Strategy)
and measurable environmental performance over the entire life cycle on the other,
such as emission data, environmental compatibility of sourcing activities, production processes as well as of products & services (Life Cycle). Environmental
Strategy and Life Cycle are called level III scores.
A further breakdown will take us to the next underlying level: The environmental strategy of a company comprises its pertinent management, policy and reporting activities, while the life cycle encompasses all value-creating steps from sourcing through internal production processes to the products & services level.
According to Fig. B these elements are treated as level IV scores.
Decomposing the
Social Value Chain
The social performance or the «Social Value Chain» can be disaggregated in much
the same way. The social strategy expresses the company’s awareness of social
issues and the tools to deal with them, while the actual social performance in the
field must be evaluated by assessing the company’s interaction with its diverse
stakeholders. Social strategy and stakeholder relations are also level III scores.
Subsequently, the social strategy of a company can then be further decomposed
into its social policy, social reporting activity as well as the respective management and control tools deployed. Stakeholder relations can obviously be broken
down into individual stakeholder groups such as suppliers, clients, shareholders,
employees and the general public. The respective scores for these factors are considered to be level IV scores.
Further breakdown
is of little avail to
investors
A further decomposition for both the environment and the social sphere is feasible and is indeed also practised when the raw data is aggregated in a bottom-up
approach. However, for most practical cases, such decomposition is of little avail
to an investor interested foremost in the financial performance of his preferenceguided investment strategy.
.
2.2 Financial Data and Observation Period
6
288 European
companies
investigated over
41/2 years
Financial performance was measured using weekly returns of originally
360 European stocks, the majority of them being part of the MSCI Europe and
representing more than 90% of MSCI Europe market capitalisation as of July
2003. We have only worked with companies where 5 years of consistent financial
data were available and which were quoted on the stock exchange during the
entire observation period from January 1999 to July 2003. Corporations that
merged with others or were subject to a takeover or bankruptcy during the observation period were discarded. We had to put up with the subsequent survivorship bias due to the lack of a long-standing time series of sustainable scores (see
also 2.3, below).
Datastream was used as financial database. Altogether 288 corporations - out of
a total of 350 for which sustainability factors were available - were included in
the empirical analysis. A complete list of the investigated stocks can be found in
the appendix. The investigation period from January 1999 to end of July 2003 was
chosen for the following reasons: 1. In order to allow for a sufficiently large number of companies to be included and 2. One often stated claim of SRI being its
mid to long-term orientation, 41/2 years seem to represent a reasonable mid-term
time frame.
2.3 Sustainable Scores (Factors)
PSVC sets out with
120-130 basic
indicators provided
by an external
research partner
The sustainable scores (factors) are calculated using a proprietary sustainability
model called the Pictet Sustainable Value Chain or PSVC (see chapter 2.1, above).
The collection of primary sustainability-related research is outsourced to a
renowned information provider specialised in the area (the SiRi Group). The
PSVC uses between 120 and 130 indicators that form what we call raw data or
basic bricks. The external research partner provides a rating for each of these
bricks. Pictet’s Quantitative Analysis team then transforms these ratings into
numerical values and successively weights and aggregates these initial values into
the sustainability scores (factors) used for this analysis.
Sustainability
scores are
normalised and
easy to interpret
Pictet does not interfere with the sustainable raw data that is provided by the SiRi
Group. It is up to the latter to design appropriate sub-indicators and sub-criteria
in order to determine a meaningful rating for the basic bricks. Usually, our
research partner will use a mix of absolute and sector-specific indicators, e.g. the
rating for product development will have to be determined differently when looking at a carmaker than when looking at a financial service provider.
The sustainable scores computed by the PSVC model are statistically normalised
across the entire universe. The scores have an average of zero and a standard
deviation of one, which lends itself to easy interpretation: A company with a score
of 1 lies one standard deviation above the average, while a company with a –2
score will lie two standard deviations below the average etc. The scores are then
centred to the average of the respective MSCI industry group. Working with
MSCI industry group level 2, we could attribute the investigated companies into
23 different industrial subsets.
Scores can be directly compared to each other within a certain industrial sector,
but they cannot be compared across different MSCI sectors.
Factors are held
constant over time
Historical (time series of) sustainable scores were not available for the entire
investigation period of 41/2 years. We have thus taken the sustainability factors
such as computed in February 2002 assuming thereby that these factors were stable over time. Due to lack of pertinent data, this admittedly simplified approach
is very often used also in the most recent quantitative studies1, although a few
papers have also tried to go beyond mere backtracking. However, the latter studies were faced with other drawbacks such as a relatively short observation period
or a limited number of observations2.
2.4 Backtracking Performance Contribution of Sustainable Factors
Sustainable scores
as active weights
in a long-short
portfolio
The sustainable scores were implemented as active weights in the portfolio. The
sustainable scores being normalised, the 288 European companies finally
included in the calculation constitute a zero-cost long-short portfolio. The results
of the study can be interpreted as the cumulative (sustainably) active performance of the European investment universe with regard to a specific factor, a construction which is per se applicable to any benchmark. When the term benchmark is used in the following, it refers to the underlying universe of the 288
companies included in the investigation. As mentioned before, the sustainable
scores are held constant over time, which corresponds to a weekly rebalancing
of the portfolio, given the weekly periodicity of the financial performance data.
1
Cf. Ziegler/Rennings/Schröder (2002), The Effect of Environmental and Social Performance on the Shareholder Value
of European Stock Corporations, Discussion Paper No. 02-32,Centre for European Economic Research (ZEW).
2
Plattner/Butz (2000), SRI- – a statistical analysis of returns, Sarasin Basic Report, 2000.
.
7
.
3. Results & Discussion
3.1 Global Sustainability Ratings — Level I Scores
8
Three sustainable
scenarios: equally
weighted, sustainably weighted and
financially
enhanced
Graph 1 displays the results of our calculations on the topmost level of aggregation (Global Sustainability Score). The following three strategies were backtested:
A. This scenario follows a process where raw data is indiscriminately aggregated
on an equally weighted basis and transformed into a global sustainability rating. Strategy A seems clearly detrimental to the financial performance of the
stocks observed. Over the observation period, such an indiscriminate or
«blind» aggregation process would have cost the investor more than 11% vs.
benchmark.
B. Here, aggregation weights were judiciously applied to reflect the underlying
sustainable relevance of the indicators and sub-elements that make up the
global sustainability rating (level II to IV scores). It was assumed on level III,
for example, that the actual performance in the field (Life Cycle and Stakeholder, respectively) is worth more than just having a good strategy in place
(Environmental and Social Strategy, respectively) or that the relevance of environmental and social aspects strongly depend on the specific MSCI sectors in
which the companies are active. This scenario can thus be termed the “fundamental” sustainability scenario, since weights are exclusively applied as a function of the underlying importance to sustainability. The backtracking of strategy B led to two interesting results:
• First, a sustainably weighted strategy was much more successful than simply aggregating the basic indicators indiscriminately. Hence it may be
inferred that it is indeed possible to extract substantial additional value by
carefully analysing the underlying industrial processes and by applying
aggregation weights accordingly.
• Second, even with a fundamentally correct weighting and aggregation
strategy, the financial performance still seems to have been slightly
penalised by approximately 3% over the entire investigation period. This is
a rather surprising result, since the majority of empirical studies conducted
over the past years suggest that there is in fact rather a positive correlation
between sustainable behaviour and financial performance3.
C. «Enhanced» sustainability strategy. Setting out with scenario B described
above, we computed the information ratio of all the sustainable factors of level
IV in order to determine the financial reliability of the sustainable signal. We
then systematically enhanced or tilted the weightings of the underlying sustainable factors accordingly.
3
Cf., for instance, Margolis/Walsh (2001), People and Profits – The Search between a Company’s Social and Financial
Performance, Lawrence Erlbaum, Mahwah (NJ) or Garz/Volk/Gilles (2002), More gain than pain – SRI: Sustainability
pays off, WestLB Panmure.
.
CONTRIBUTION OF GLOBAL SUSTAINABILITY FACTOR
110
9
Global Sustainability Factor, sustainably enhanced
Global Sustainability Factor, pure sustainable weighting
Global Sustainability Factor, equally weighted
105
100
95
90
85
12.98
06.99
12.99
06.00
12.00
06.01
12.01
06.02
12.02
06.03
Graph 1. Factor returns on level I (Global Sustainability Scores). The graph displays the performance contribution of
three different weighting scenarios over the last four and a half years.
Precautionary
approach; maximum
allowed deviation
However, while fully recognising the performance-enhancing claim of sustainable investment, we were – for philosophical and precautionary reasons - not willing to compromise the overriding objective of SRI, namely to invest in truly sustainable companies. We therefore had to strike a compromise between a
fundamentally sustainable viewpoint and one driven more by financial performance. The performance tilt applied was thus subject to several restrictions:
All elements that had originally been identified as contributing to the overall sustainability of a company (sustainable factors) must carry a minimum weight of
3%. In other words, we did not allow the model to go short on the environment
and long on social indicators – although, from a purely financial point of view,
this would indeed seem to have been a promising strategy.
The deviation from the purely sustainably determined weights was restricted to
+/-15%, thus guaranteeing that the performance-enhanced weighting did not
thwart the underlying fundamental sustainability analysis.
«Enhanced»
sustainable scenario
has beaten the
benchmark
The results of the performance-tilted or «enhanced» scenario C are very encouraging. It started out flat versus benchmark, then slightly underperformed the
MSCI Europe during 2000-2001, but clearly outperformed the benchmark from
the third quarter of 2001 until the third quarter of 2002. Since then, the enhanced
scenario seems to have lost ground again versus the benchmark, but it still finished slightly higher (+1.56%) after four and a half years.
Again, the following two observations are important:
• First, the findings suggest that it is indeed possible to considerably enhance
the performance of sustainable investment by introducing a financial performance tilt and
• Second, this can be effected without unduly compromising the essence of
fundamental sustainability analysis.
.
A further caution seems appropriate: The performance tilt being based on knowledge accumulated over the entire observation period, the results are necessarily
of an in-sample nature, meaning that in real life it would have been extremely difficult to match the performance shown on graph 1. However, this also means that
it has indeed been possible to systematically outperform the universe by carefully
weighting sustainably and financially tilted factors.
10
Negative contribution of sustainability
in geo-politically
unstable times
We would also like to point out the very negative performance contribution that
the Global Sustainability factor – and in fact most of the underlying factors as we
will see later on - showed in the last quarter of 2002 and the first quarter of 2003.
This period was certainly characterised by an unusual degree of geopolitical tension (war against terrorism, the Iraq crisis). In such unstable times of heightened
military activities it seems likely that sustainable investment strategies, the majority of which exclude companies involved in armaments, for example, might face
some difficulties. The negative performance in the last quarter of 2002 and the first
quarter of 2003 is not restricted to our investment universe alone but became manifest also, to a greater or lesser extent, in other sustainable investment products
available on the market – quite independently from the specific research methodology applied. It seems indeed that sustainable factors were thus penalised performance-wise almost across the board during that period.
3.2 Environmental and Social Performance — Level II Scores
Environmental
versus social factors
As described in chapter 2 above, the Global Sustainability Score of a company
can be decomposed into its two principal components: its environmental and
social performance, respectively. We have run the calculations again for two differently weighted scenarios (see Graph 2, below): The first scenario is perfectly
equally-weighted, while the second, sustainably weighted scenario allocates less
importance to the existence of a strong environmental/social strategy, with more
importance attached to a company’s actual performance «in the field».
CONTRIBUTION OF ENVIRONMENTAL AND SOCIAL FACTORS
Decomposing Sustainability - Environmental vs. Social Value Chain (Level II Scores)
120
115
Env. Value Chain, sustainably enhanced
Env.Value Chain, equally weighted
Soc. Value Chain, sustainably enhanced
Soc.Value Chain, equally weighted
110
105
100
95
90
85
12.98
06.99
12.99
06.00
12.00
06.01
12.01
06.02
12.02
06.03
Graph 2. Factor returns on level II: Performance contribution of the environmental and the social value chain.
Weighting scheme
decisive; particularly
for the social value
chain
The results lead us to three interesting observations:
11
• First, the results strongly depend on the weighting scheme applied. For the
sustainably weighted tilted scenario, the social score clearly outperforms
the environmental score by almost 7%, whereas for the equally weighted
strategy, the outperformance of the social factor was just 2.1% over the
period, although in certain periods, one factor seems to have dominated
the other more distinctly and vice versa.
• Second, for the social dimension, the difference between the equally
weighted scenario and the enhanced sustainability scenario is quite impressive, whereas it is only moderately so for the environment. Intuitively, we
would rather expect the opposite. Obviously, it does make a huge difference whether we indiscriminately consider all stakeholders to have the
same relevance or if we determine their importance on an industry-specific
basis, e.g. supply chain management would obviously be more important
to the food or textile industry than to a company operating exclusively in
the service industry. For the environmental sphere, this weighting effect is
much less pronounced, although it is still possible to add value by applying
a sustainably meaningful weighting, e.g. by attributing an above-average
weight to a car manufacturer’s performance in product design.
A more detailed analysis revealed that the environmental performance of the
companies across the different production steps (sourcing, own production
processes, products & services) were in general much more homogenous than in
the social area. That is why the weighting has less effect. Nevertheless, the
weighted scenario still beats the equally weighted scenario by almost 6% over
the complete observation period.
• Third, it is noteworthy that one and only one investment strategy (betting on
the “enhanced” and sustainably weighted social factor) was able to outperform the benchmark over the past 55 months. Based solely on these findings
and taking a purely financial standpoint, i.e. ignoring all sustainability-related
concerns, one might indeed conclude that it would be best to bet exclusively
on socially compatible companies and to forget about environmental performance altogether. This is a surprising result that also sharply contradicts
the findings of other studies which established that it was predominantly
environmental performance that ultimately paid off, whereas social compatibility’s effect on financial performance was at best indifferent4.
Only the sustainably
enhanced social
factor outperformed
3.3 Social Strategy versus Stakeholder Relations — Level III Scores
Breaking down
the Social Value
Chain…
.
Having found that the social assessment of a company obviously goes hand in hand
with its financial outperformance over the observation period, we will now dig even
deeper and break down the social score into its two main components, which are
– according to our PSVC methodology described above - the strategic positioning
of the company regarding social issues (Social Strategy) and the effective quality
of its relationship with its different stakeholders (Stakeholder Relations).
4
Cf. Plattner/Butz (2000), see fn. 2 for details.
.
12
Out-performance
attributable to good
stakeholder
relations
As Graph 3 below illustrates, the analysis revealed that the outperformance of
the entire social value chain clearly stems from the actual quality of the stakeholder relations, whereas the mere existence of a good social strategy seems
rather to have been negatively correlated with financial performance!
The observation about the relative performance of the strategy factor and the
stakeholder factor holds true for both the equally weighted scenario and the
«enhanced» sustainable scenario alike, although, in absolute terms, the outperformance of the tilted sustainable scenario was even higher, whereas the underperformance of the strategic factor was less marked.
SOCIAL STRATEGY VERSUS STAKEHOLDER RELATIONS
120
115
Strategy, sustainably enhanced
Strategy, equally weighted
Stakeholder, sustainably enhanced
Stakeholder, equally weighted
110
105
100
95
90
85
12.98
06.99
12.99
06.00
12.00
06.01
12.01
06.02
12.02
Graph 3. Factor returns on scoring level III: Social Strategy versus actual Stakeholder Relations.
Strategic aspects
are less important
The obvious gap between the strategic and the stakeholder factor return leaves
us somewhat perplexed. Although from a sustainable point of view, the existence
of an appropriate social strategy and the respective management tools is generally believed to be crucial when trying to improve the relationship with stakeholders, our findings strongly suggest that the importance of procedural and formal aspects of the social value chain should not be overstated, at least not from
a financial contribution point of view.
Apart from the mentioned performance gap, it is also obvious that the sustainably weighted scenario largely dominates the unweighted scenario. This is the
case for both the strategic part of the social value chain and the stakeholder part.
Only the latter outperformed the benchmark over the entire observation period.
3.4 Suppliers, Employees, Clients and General Public – Level IV Scores
Breakdown
of stakeholder
relations
Let us now decompose the stakeholder score – which, according to our findings,
proved to be an excellent proxy for financial performance – even further into its
underlying components. Actual stakeholder relations (the performance «in the
field») are best broken down into the individual stakeholder groups: employees,
suppliers, stakeholders, clients and the general public.
Good relations
with clients
and the public are
rewarded
.
The results discussed hereafter are displayed in Graph 4, below.
13
It strikes the eye that only two stakeholder groups out of five seem to beat the
benchmark consistently over the observation period: Clients (+5.7%) and the
General Public (+8.9%). On the other hand, a company’s relations with its employees seem to have no clear-cut effect on financial performance, whereas the alphas
stemming from the shareholders’ (corporate governance) and the suppliers’
scores proved to be negative (-7.4% and -9.5% at the end of the period, respectively), although both factors have seen a substantial rebound in the second quarter of the current year.
The outperformance generated by the client and general public factors is rather
impressive, a result which is, if not in its extent then at least in its essence, in line
with assumptions underlying the sustainability model used. The arguments put
forward to include client relations in any sustainability analysis claim that it is
crucial for any company to be able to sell its products and/or services at sustainable margins. Loyal customers and clients are therefore supposed to be key to
any successful economic activity.
The results for the sustainability factor «General Public» are equally in accordance
with the expectations of the sustainable investment community. They generally
believe that constructive and transparent relations with the authorities and the communities are of paramount importance for a company, since its so-called «licenceto-operate» strongly depends on how it has fulfilled its responsibilities toward the
public in the past and how the company is generally perceived in the public eye.
CONTRIBUTION OF INDIVIDUAL STAKEHOLDER GROUPS
120
115
110
Public, sustainably enhanced
Clients, sustainably enhanced
Employees, sustainably enhanced
Shareholder sustainably enhanced
Suppliers, sustainably enhanced
105
100
95
90
85
80
12.98
06.99
12.99
06.00
12.00
06.01
12.01
06.02
12.02
06.03
Graph 4. Factor returns, level IV: Performance contribution of individual stakeholder groups for the sustainably
weighted and enhanced scenario.
Labour relations
essentially flat
The factor measuring the quality of a company’s relations with its employees initially made a negative performance contribution, but from the third quarter 2000
onwards until the third quarter 2002, good labour relations clearly had a benign
effect on the financial performance of the investigated companies. In the last year
of our observation period, the contribution of this factor has again fallen behind
benchmark. Nevertheless, it is fair to say that over the entire period the factor
.
Employees had no effect on the financial performance. Depending on one’s standpoint, this indifferent result might be viewed as disappointing. On the other hand,
it does evidence, that maintaining good relations with employees does not cost
the companies anything in the long run.
14
Negative contribution of Corporate
Governance factor
How does the negative contribution of the shareholder factor fit in with the supposedly increasing importance of corporate governance in the aftermath of the
widely publicised balance sheet scandals? We would like to venture the following explanation:
It was claimed above that the social strategy measures the strategic positioning
of the company whereas stakeholder relations measure the actual performance
«in the field». Of all the stakeholder relations analysed, this is maybe least true for
the shareholder factor. The indicators for determining the shareholder rating are
based on local best practice, pertinent codes and recommendations, and are thus
necessarily of a rather formal and procedural nature. The stakeholder rating is
thus more comparable in nature to the strategic factors than to the remaining
stakeholder ratings. Having established, that strategic factors have consistently
underperformed the benchmark over the last 5 years, this might represent a good
argument as to why the shareholder factor is not rewarded either. However, the
conclusion that good corporate governance does not matter is most probably
erroneous. The results may also suggest that corporate governance principles are
best enforced by other means, e.g. by actively exercising voting rights or engaging in a dialogue instead of merely relying on formal compliance criteria.
It is also interesting to note that the intermediate outperformance in the year from
fourth quarter of 2001 to the third quarter of 2002 falls into a period when corporate governance issues were on top of many a business agenda in the aftermath of the different accounting scandals (the same temporary outperformance
can be observed for the factors General Public and Employees, though).
Good supplier
relations were not
rewarded either
Even more difficult to interpret is the negative performance contribution of the
supplier relations factor. This finding clearly goes against the beliefs generally
put forward by sustainable investment proponents. Arguments supporting this
view generally assume that systematic supply chain management and the cultivation of good relations with suppliers are important factors for the success of a
company. At least performance-wise, our results do not confirm this view. The
results even seem to suggest that the companies that were able to pass the pressure along the supply chain were (financially) rewarded for doing so.
However, we also know that exposure to controversial issues in the supply chain
is very different from sector to sector. Some industries (food, textile etc.) are particularly exposed, and a more detailed analysis undertaken did reveal that if the
same calculations are done for particularly exposed industries alone, then the
contribution seems to be the reverse. However, the objective of this study is to
present results that are solid from a statistical point of view. And we do not have
enough observations in the highly exposed sectors to allow for conclusive results.
The supplier factor shown in Graph 4 therefore expresses the performance contribution of the suppliers’ rating of all 288 companies, and, undeniably, for most
of these companies, good supplier relations indeed seem to have been of no or
even negative financial consequence.
Precautionary
approach. Sustainable criteria cannot
be shorted
Once again, by taking a purely financial view it could be inferred that going short
on suppliers and shareholders would increase the sustainable alpha stemming
from the social value chain. However, as stated before, we have chosen not to
deviate too far from a sustainably meaningful weighting scheme.
The decision to do so could also be interpreted as a precautionary approach: In fact
we can never fully exclude the existence of (hidden) synergies or interdependencies between factors. By decomposing the performance into sub-elements, we simply acted as if the factors were orthogonal and mutually independent.
The fact that there is no overlap in indicators used to calculate the scores for two
different stakeholder groups does not prove, however, that independence is
always the case. It cannot therefore be excluded that a certain performance in
one factor helps to achieve a good performance in another, but the «facilitating»
itself does not necessarily have to show a positive contribution.
3.5 Environmental Strategy versus actual Performance – Level III Scores
Strategic positioning
versus actual
performance
As we did for the Social Value Chain factor, we now decompose the Environmental
Value Chain factor into its two main components, which are the strategic positioning of the company regarding environmental issues in general (Environmental Strategy) and its actual environmental performance over the entire life cycle of
its products and services (Life Cycle). As Graph 5 below illustrates, the results
clearly show that the overall underperformance of the so-called Environmental
Value Chain we have already pointed out can be explained to a large extent by the
clear underperformance of the environmental strategy factor, whereas the contribution of environmental performance «in the field» was only slightly negative
over the entire observation period. A startling gap of 15.1 % and 12.8 %, respectively, was found for both the equally weighted scenario and the sustainably
enhanced scenario, which proves that the underperformance of the strategic factor is not just due to weighting effects but seems to be rather systematic.
ENVIRONMENTAL STRATEGY VERSUS LIFE CYCLE
(LIFE CYCLE)
100
95
90
85
80
12.98
Env. Life Cycle, sustainably enhanced
Env. Life Cycle, equally weighted
Env.Strategy, sustainably enhanced
Env.Strategy, equally weighted
06.99
12.99
06.00
12.00
06.01
12.01
06.02
12.02
06.03
Graph 5. Factor returns on level III: Environmental strategy versus actual environmental performance along the life
cycle. Comparison between the equally weighted and the sustainably enhanced weighting scenario.
.
15
.
16
Strategic factors
under-performed
As for the Social Value Chain, the performance gap between the strategic factor
and the performance «in-the-field» factor is quite amazing. Although from a sustainable point of view, having a clear environmental strategy and an appropriate
environmental management system is generally believed to be very important for
a company when trying to reduce the environmental impact of its business activities, our findings suggest – even more strongly than for the social sphere – that
in terms of financial performance contribution, procedural and formal aspects do
not seem to have been rewarded by financial markets.
No remarkable
difference between
weighting schemes
Interestingly, there are only small differences between the equally weighted and
the sustainably enhanced scenario. For the life cycle factor the unweighted scenario seems even to have slightly dominated the sustainably weighted scenario
for most of the time. Only towards the end of the observation period has the sustainably enhanced scenario taken the lead over its unweighted counterpart. For
the environmental strategy factor, the sustainably weighted scenario seems to
have dominated the equally weighted scenario consistently. However, the difference is small and given the stark underperformance of the strategy factor as a
whole, we cannot draw any useful conclusions. The results thus suggest that a
careful industry-specific weighting scheme could only add very limited value over
an unweighted aggregation scheme during the last 41/2 years. Again, this observation goes against the established (sustainable) point of view, which would
rather claim that applying a judicious weighting scheme based on ecological
process know-how almost certainly influences the outcome of the overall result.
What counts is the
de facto performance, where data is
generally scarce…
The indifference of the weighting scheme applied might be surprising, but let us
not forget the much more fundamental insight already mentioned above: Based
on the results of our investigations, what really seems to count for a company’s
financial performance seems to be its actual environmental performance in the
field and not the existence of a formal commitment or the level of its environmental reporting standards. This finding is paramount because:
• The actual (measured) environmental performance is also the only thing that
counts from an ecosystem point of view. Plainly speaking, nature does not care
whether there is a well-formulated and publicised environmental policy, but
only cares for the results, i.e. real reductions in environmental loads.
• Most research agencies have a strong qualitative bias in their approach to sustainability research. Quantitative data and indicators which would actually
give more insight into a company’s real environmental performance is still
scarce, whereas procedural and formal criteria are abundant. However, the
flagrant gap in performance contribution between strategic and real performance factors is strong evidence for the need of a more quantitative
approach to environmental analysis.
3.6 Environmental Life Cycle: From Cradle to Grave – Level IV Scores
Decomposing
the Life Cycle
We are now going to decompose the Life Cycle score into its underlying components in order to see whether we can gain more information. We remember (cf. Fig
B, above) that the Life Cycle - the performance «in the field» - is broken down into
the different production steps according to the so-called «from-cradle-to-grave»
principle, i.e. assessing environmental impacts engendered by a company’s sourcing practices, at its suppliers’premises, inhouse production processes as well as at
the products and services level. The results discussed hereafter are displayed in
Graph 6, below.
Sourcing and environmental characteristics of products
made a positive
contribution
In contrast to our findings for the social value chain, it seems that an increased environmental cooperation with suppliers has not penalised the financial performance
of companies, but rather exerted a positive effect on performance over the observation period. The same holds true for the products and services of a company.
The factor encompassing the environmental design and compatibility of the products and services was essentially flat over the investigated period and but eventually finished almost 5 percentage points above the benchmark. The Products & Services factor also displayed a lower volatility than Sourcing & Suppliers.
SOURCING, PRODUCTION PROCESSES, PRODUCTS & SERVICES
115
Products & Services, sustainably enhanced
Products & Services, equally weighted
Sourcing/Suppliers, sustainably enhanced
Sourcing/Suppliers, equally weighted
Production Processes, sustainably enhanced
Production Processes, equally weighted
110
105
100
95
90
85
12.98
06.99
12.99
06.00
12.00
06.01
12.01
06.02
12.02
06.03
Graph 6. Factor returns on level IV. The different production steps forming the environmental life cycle: suppliers,
(inhouse) production processes and products & services. The graph displays the performance contribution of these
factors for two different weighting scenarios.
The factor “inhouse
production
processes” has
penalised
performance
It is also interesting to note that both the Sourcing & Suppliers and the Products
& Services factors have witnessed a substantial recovery in the current year and
have outperformed the benchmark by 3.9% and up to 4.7%, respectively at the
end of the observation period. The quite negative performance contribution of
the factor (inhouse) Production Processes has continued its downward trend,
though.
The quite negative contribution of inhouse production processes is nevertheless
remarkable and – once again – goes against commonly held convictions. After all,
it is generally believed by the sustainable community that environmentally
advanced production processes or best practice enhance enterprise value. Sustainability-related research and analysis is still predominantly focused on a company’s own production processes, whereas our results suggest that it is much
more beneficial (at least financially) to manage environmental impacts well at the
suppliers’ level and again in product development. Be that as it may, inhouse production remains the area where a company certainly has the most control over
its environmental impacts. One might thus conjecture that the emphasis put upon
.
17
.
the production processes in contemporary research seems to be motivated also
by generally better availability of relevant data in this area, whereas reliable data
on suppliers and product development is still more difficult to get.
18
Weighting schemes
applied again
of little effect
As we have already observed for the level III scores of the environmental value
chain, the differences between the equally weighted scenario and the sustainably
enhanced scenario are hardly noteworthy, maybe with the exception of the
inhouse production processes. For the latter factor, it seems that the sustainably
weighted scenario has beaten the unweighted scenario consistently over the
whole period. Maybe it is fair to say that the ability to create a difference by
weighting is also dependent on the number of basic indicators which are used to
compute a factor. In the hypothetical case where we had just one indicator, all the
weight will automatically rest on that indicator. And in fact, while we have two
basic indicators for environmental sourcing & suppliers only, and five for products & services, there are already ten indicators used to build the inhouse production processes factor. Therefore, it seems plausible that the difference between
the equally weighted and the sustainably weighted scenario is also more significant. However, we would like to point out that the mere number of indicators is
not necessarily a good proxy for the sustainable relevance of a particular area.
That is why there is no use at all in artificially augmenting the number of indicators by including irrelevant ones.
Are there still other explanations - apart from this technical reason just mentioned
– that may explain why the application of a judicious weighting scheme has not
effectively added value over the observation period? There probably are: A closer
look at the basic ratings used to calculate the individual life cycle factors
described, revealed that, within a specific factor, environmentally advanced companies seem to be either good everywhere or generally poor throughout. We have
no way to tell whether this is so in reality or whether we are witnessing here a
certain research-induced bias. All we can say is that the primary data seems
closely correlated in this respect. Therefore, all other things being equal, the
(financial) outcome is to a large extent indifferent of the weighting scheme
applied.
4. Conclusion/Summary
By systematically decomposing the «sustainability» of companies into its constituents and backtracking their influence on stock price performance, it is indeed
possible to establish where financial value has been created and where it was lost.
In almost all the cases, the careful weighting of indicators and sub-elements
according to the actual relevance of their underlying sustainable processes generates considerably higher alphas than an indiscriminate aggregation of the sustainability-related data on an equally weighted basis.
The contribution of sustainable factors to financial performance can be further
enhanced by judiciously tilting the aggregation weights according to the findings
of a detailed factor decomposition. However, following the precautionary principle, it does not seem wise to deviate too much from a “sustainably fundamental” industry-specific weighting scheme, which has to be determined purely on
the basis of sustainable process know-how.
The financially enhanced sustainability scenario is the only investment strategy
that has not penalised performance over the observation period but rather generated a slight value-added over the benchmark. However, based on our results,
it is not possible to infer any statistically significant outperformance. The latter
finding is in line with the most recent empirical studies (Ziegler et al. 2002), but
seems to contradict the majority of other studies that claim to have found such a
connection.
Only the social compatibility of companies has been rewarded financially over
the entire observation period of 41/2 years, whereas the environmental performance had a slightly negative effect on the stock price performance of the investigated companies. These findings also contradict several SRI performance studies which have been conducted over the last years (Margolis/Walsh, 2001).
A further interesting result is the fact that more formal and procedural criteria
such as environmental or social policies and the pertinent reporting frameworks
not only seem to have had no positive effect on the financial performance of companies, but have clearly penalised performance over the observation period. Factors more closely related to the actual sustainable performance “in the field” (both
along the environmental and the social value chain) consistently showed a more
positive contribution toward the stock price performance than formal criteria. To
put it more clearly, one could say that the only thing that seems to matter is what
a company does, not what it says. These findings might also encourage current
sustainability research - which in general still focuses predominantly on more formal and qualitative criteria - to gradually embrace a more comprehensive set of
quantitative performance indicators.
Finally, our findings confirm the view that (only) by using an enhanced sustainability model it is indeed possible to invest according to the principles of sustainable development without compromising the financial performance of the
investment. The study also presents further evidence that the application of quantitative techniques holds the key for realising the full potential of sustainable
investment.
.
19
.
20
Annex: List of companies included in the study
N°
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
NAME
3I GROUP
ABB
ABBEY NATIONAL
ABN AMRO HOLDING
ACCOR
ADECCO NOM.
AEGON
AFFICHAGE HOLDING
AGF -ASSURANCES GLES DE FRANCEAHOLD KONINKLIJKE
AKZO NOBEL
ALCATEL
ALLEANZA ASSICURAZIONI
ALLIANCE & LEICESTER
ALLIANZ NAM.
ALLIED DOMECQ
ALLIED IRISH BANKS
ALMANIJ PART SOC.
ALTADIS
ALTANA
AMB GENERALI HOLDING INHA.
AMERSHAM
AMVESCAP
ARM HOLDINGS
ASCOM HOLDING NOM. VN.10
ASML HOLDING
ASSICURAZIONI GENERALI
ASSOCIATED BRITISH FOODS
ASTRAZENECA
ATLAS COPCO 'A'
AVENTIS
AVIVA
AXA
BAA
BACHEM 'B'
BAE SYSTEMS
BALOISE-HOLDING NOM.
BANCA FIDEURAM
BANCA INTESA
BANCA NAZIONALE DEL LAVORO
BANCO COMERCIAL PORTUGUES REG.
BANCO POPULAR ESPANOL
BANK OF IRELAND
BANQUE CANTONALE VAUDOISE NOM.
BARCLAYS (NEW)
BARRY CALLEBAUT
BASF
BAYER
INDUS
DIVFIN
CAPGDS
BANKS
BANKS
LEISUR
COMMSE
INSURE
MEDIA
INSURE
FOODDR
MATRLS
TECHHW
INSURE
BANKS
INSURE
FOODBE
BANKS
DIVFIN
FOODBE
PHARMB
INSURE
HEALTH
DIVFIN
TECHHW
TECHHW
TECHHW
INSURE
FOODBE
PHARMB
CAPGDS
PHARMB
INSURE
INSURE
TRANSP
PHARMB
CAPGDS
INSURE
DIVFIN
BANKS
BANKS
BANKS
BANKS
BANKS
BANKS
BANKS
FOODBE
MATRLS
MATRLS
CTRY
UKI
SWI
UKI
NET
FRA
SWI
NET
SWI
FRA
NET
NET
FRA
ITA
UKI
GER
UKI
IRE
BEL
SPA
GER
GER
UKI
UKI
UKI
SWI
NET
ITA
UKI
UKI
SWE
FRA
UKI
FRA
UKI
SWI
UKI
SWI
ITA
ITA
ITA
POR
SPA
IRE
SWI
UKI
SWI
GER
GER
N°
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
NAME
BAYERISCHE HYPO.& VEREINSBANK
BBVA B.BILBAO VIZCAYA ARGENT.NOM.
BEIERSDORF
BELIMO HOLDING
BG GROUP
BHP BILLITON PLC
BMW BAYERISCHE MOTORENWERKE
BNP PARIBAS
BOBST GROUP
BOC GROUP
BON APPETIT GROUP
BOOTS GROUP
BOUYGUES
BP
BRITISH AIRWAYS
BRITISH AMERICAN TOBACCO
BRITISH SKY BROADCASTING GROUP
BSCH BANCO SANTANDER CENTRAL NOM.
BT GROUP
BUCHER INDUSTRIES
CABLE & WIRELESS
CADBURY SCHWEPPES
CAP GEMINI
CAPITA GROUP
CAPITALIA
CARREFOUR SUPERMARCHE
CASINO GUICHARD PERRACHON
CENTERPULSE
CENTRICA
CHRISTIAN DIOR
CIBA SPECIALITES CHIMIQUES HOLD.
CIE FIN.RICHEMONT UNIT 'A'
CLARIANT
COMMERZBANK
CREDIT SUISSE GROUP
CRH
DAETWYLER HOLDING
DAILY MAIL & GENERAL TRUST 'A'
DAIMLERCHRYSLER
DAMPSKIBSSELSKABET AF 1912 'B'
DANSKE BANK
DEGUSSA
DEUTSCHE BANK NAM.
DEUTSCHE LUFTHANSA -VINKULIERTDEUTSCHE TELEKOM NAM.
DEXIA
DIAGEO
DISETRONIC HOLDING NOM. -SDV-
INDUS
BANKS
BANKS
HOUSEP
CAPGDS
ENERGY
MATRLS
AUTO
BANKS
CAPGDS
MATRLS
FOODDR
FOODDR
TELECO
ENERGY
TRANSP
FOODBE
MEDIA
BANKS
TELECO
CAPGDS
TELECO
FOODBE
SOFTSE
COMMSE
BANKS
FOODDR
FOODDR
HEALTH
UTILIT
CONSDU
MATRLS
CONSDU
MATRLS
BANKS
BANKS
MATRLS
CAPGDS
MEDIA
AUTO
TRANSP
BANKS
MATRLS
BANKS
TRANSP
TELECO
BANKS
FOODBE
HEALTH
CTRY
GER
SPA
GER
SWI
UKI
UKI
GER
FRA
SWI
UKI
SWI
UKI
FRA
UKI
UKI
UKI
UKI
SPA
UKI
SWI
UKI
UKI
FRA
UKI
ITA
FRA
FRA
SWI
UKI
FRA
SWI
SWI
SWI
GER
SWI
IRE
SWI
UKI
GER
DEN
DEN
GER
GER
GER
GER
BEL
UKI
SWI
.
N°
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
NAME
DISTEFORA HOLDING NOM.
DIXONS GROUP
E.ON
EDP-ELECTRICIDADE PORTUGAL -NEWELAN CORP
ELECTRABEL PART SOC.
ELECTROCOMPONENTS
ELECTROLUX 'B'
EMI GROUP
EMS-CHEMIE HOLDING PORT.
ENDESA
ENI
EQUANT
ERICSSON TELEFON 'B'
FIAT
FINECOGROUP
FOERENINGSSPARBANKEN 'A'
FORBO HOLDING
FORTIS
FRANCE TELECOM
FRESENIUS MEDICAL CARE
GAS NATURAL SDG
GEORGES FISCHER NOM.
GKN
GLAXOSMITHKLINE
GRANADA PLC
GROUPE BRUXELLES LAMBERT GBL
GROUPE DANONE
GURIT-HEBERLEIN CHF 100
GUS
HANSON
HAYS
HBOS
HEINEKEN
HENKEL VORZ.
HENNES & MAURITZ 'B'
HERO, LENZBURG
HILTI B.PART.
HILTON GROUP
HOLCIM PORT.
HSBC HOLDINGS (USD 0,50)
IBERDROLA
IMPERIAL CHEMICAL INDUSTRIES
IMPERIAL TOBACCO GROUP
ING GROEP C.ACT.
INVENSYS
JELMOLI HOLDING PORT.
JULIUS BAER HOLDING PORT.
INDUS
SOFTSE
RETAIL
UTILIT
UTILIT
PHARMB
UTILIT
CAPGDS
CONSDU
MEDIA
MATRLS
UTILIT
ENERGY
TELECO
TECHHW
AUTO
DIVFIN
BANKS
CONSDU
DIVFIN
TELECO
HEALTH
UTILIT
CAPGDS
AUTO
PHARMB
MEDIA
DIVFIN
FOODBE
MATRLS
RETAIL
MATRLS
COMMSE
BANKS
FOODBE
HOUSEP
RETAIL
FOODBE
CAPGDS
LEISUR
MATRLS
BANKS
UTILIT
MATRLS
FOODBE
DIVFIN
CAPGDS
RETAIL
BANKS
CTRY
SWI
UKI
GER
POR
IRE
BEL
UKI
SWE
UKI
SWI
SPA
ITA
FRA
SWE
ITA
ITA
SWE
SWI
BEL
FRA
GER
SPA
SWI
UKI
UKI
UKI
BEL
FRA
SWI
UKI
UKI
UKI
UKI
NET
GER
SWE
SWI
SWI
UKI
SWI
UKI
SPA
UKI
UKI
NET
UKI
SWI
SWI
N°
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
186
187
188
189
190
191
192
NAME
KARSTADT QUELLE
KBC BANCASSURANCE HOLD. PART SOC.
KINGFISHER
KPN KONINKLIJKE
KUDELSKI
KUONI REISEN HOLDING NOM. 'B'
L'AIR LIQUIDE
L'OREAL
LAFARGE SA
LAGARDERE SCA NOM.
LAND SECURITIES GROUP
LEGAL & GENERAL GROUP
LINDE
LINDT & SPRUENGLI B.PART. (NEW)
LLOYDS TSB GROUP
LOGICACMG
LOGITECH INTERNATIONAL
LVMH MOET HENNESSY LOUIS VUITTON
MARKS & SPENCER GROUP
MEDIASET
MEDIOBANCA
MEDIOLANUM
METRO
MICHELIN 'B' NOM.
MIKRON HOLDING NOM.
MLP
MOEVENPICK-HOLDING PORT.
MUENCHENER RUECKVER. NAM.
NATIONAL GRID TRANSCO
NESTLE
NOKIA
NORDEA
NORSK HYDRO REG.
NOVARTIS NOM.
NOVO-NORDISK 'B'
NUMICO KONINKLIJKE
OLIVETTI
PEARSON
PEUGEOT PORT.
PHOENIX MECANO
PHONAK HOLDING NOM.
PINAULT PRINTEMPS REDOUTE
PIRELLI SPA
PORTUGAL TELECOM
PRUDENTIAL PLC
PUBLIGROUPE NOM.
RAS RIUNIONE ADRIATICA DI SICURTA
RECKITT BENCKISER PLC
INDUS
RETAIL
BANKS
RETAIL
TELECO
TECHHW
LEISUR
MATRLS
HOUSEP
MATRLS
MEDIA
REALES
INSURE
CAPGDS
FOODBE
BANKS
SOFTSE
TECHHW
CONSDU
RETAIL
MEDIA
BANKS
DIVFIN
RETAIL
AUTO
CAPGDS
DIVFIN
LEISUR
INSURE
UTILIT
FOODBE
TECHHW
BANKS
ENERGY
PHARMB
PHARMB
FOODBE
TELECO
MEDIA
AUTO
TECHHW
HEALTH
RETAIL
CAPGDS
TELECO
INSURE
MEDIA
INSURE
HOUSEP
CTRY
GER
BEL
UKI
NET
SWI
SWI
FRA
FRA
FRA
FRA
UKI
UKI
GER
SWI
UKI
UKI
SWI
FRA
UKI
ITA
ITA
ITA
GER
FRA
SWI
GER
SWI
GER
UKI
SWI
FIN
SWE
NOR
SWI
DEN
NET
ITA
UKI
FRA
SWI
SWI
FRA
ITA
POR
UKI
SWI
ITA
UKI
21
.
22
N°
193
194
195
196
197
198
199
200
201
202
203
204
205
206
207
208
209
210
211
212
213
214
215
216
217
218
219
220
221
222
223
224
225
226
227
228
229
230
231
232
233
234
235
236
237
238
239
240
NAME
REED ELSEVIER PLC
RENAULT -REGIE NATIONALERENTOKIL INITIAL
REPSOL YPF
REUTERS GROUP
RIETER HOLDING
RIO TINTO
ROCHE HOLDING B.JCE
ROLLS-ROYCE
ROYAL & SUN ALLIANCE INSURANCE
ROYAL BANK OF SCOTLAND GROUP
ROYAL DUTCH PETROLEUM
ROYAL PHILIPS ELECTRONICS
RWE 'A' (NEU)
S.G.S. NOM.
SAGE GROUP PLC
SAINSBURY J.
SAINT-GOBAIN
SAMPO OYJ 'A'
SANDVIK
SANOFI SYNTHELABO
SANPAOLO-IMI
SAP SYSTEME ANWENDUNGEN PRODUKTE
SAURER NOM.
SCANIA 'A'
SCHAFFNER HOLDING
SCHERING
SCHINDLER HOLDING B.PART.
SCHNEIDER ELECTRIC
SCHRODERS
SCOTTISH & NEWCASTLE
SCOTTISH & SOUTHERN ENERGY
SCOTTISH POWER
SEAT PAGINE GIALLE
SECURITAS 'B'
SERONO 'B'
SEZ HOLDING NOM.
SIEMENS NAM.
SIG HOLDING NOM.
SIKA PART.
SIX CONTINENTS
SKANDIA INSURANCE
SKANDINAVISKA ENSKILDA 'A'
SMITH & NEPHEW
SMITHS GROUP
SOCIETE GENERALE PARIS
SODEXHO ALLIANCE
SOLVAY PORT.
INDUS
MEDIA
AUTO
COMMSE
ENERGY
MEDIA
CAPGDS
MATRLS
PHARMB
CAPGDS
INSURE
BANKS
ENERGY
CONSDU
UTILIT
COMMSE
SOFTSE
FOODDR
CAPGDS
INSURE
CAPGDS
PHARMB
BANKS
SOFTSE
CAPGDS
CAPGDS
TECHHW
PHARMB
CAPGDS
CAPGDS
DIVFIN
FOODBE
UTILIT
UTILIT
MEDIA
COMMSE
PHARMB
TECHHW
CAPGDS
CAPGDS
MATRLS
LEISUR
INSURE
BANKS
HEALTH
CAPGDS
BANKS
LEISUR
MATRLS
CTRY
UKI
FRA
UKI
SPA
UKI
SWI
UKI
SWI
UKI
UKI
UKI
NET
NET
GER
SWI
UKI
UKI
FRA
FIN
SWE
FRA
ITA
GER
SWI
SWE
SWI
GER
SWI
FRA
UKI
UKI
UKI
UKI
ITA
SWE
SWI
SWI
GER
SWI
SWI
UKI
SWE
SWE
UKI
UKI
FRA
FRA
BEL
N°
241
242
243
244
245
246
247
248
249
250
251
252
253
254
255
256
257
258
259
260
261
262
263
264
265
266
267
268
269
270
271
272
273
274
275
276
277
278
279
280
281
282
283
284
285
286
287
288
NAME
STANDARD CHARTERED
STMICROELECTRONICS
STORA ENSO 'R' (EUR)
STRAUMANN HOLDING
SUEZ
SUISSE REASSURANCES NOM.
SULZER NOM.
SVENSKA CELLULOSA 'B'
SVENSKA HANDELSBANKEN 'A'
SWATCH GROUP PORT.
SWISSCOM
SWISSLOG HOLDING
TDC
TECAN GROUP NOM. N.1
TELE2 'B'
TELECOM ITALIA
TELEFONICA
TELEVISION FRANCAISE 1 -TF1-PORT.
TESCO PLC
THALES
THYSSENKRUPP
TIM -TELECOM ITALIA MOBILETOTAL FINA ELF
TPG
TUI
UBS
UCB
UNAXIS HOLDING NOM.
UNICREDITO ITALIANO
UNILABS
UNILEVER NV C.ACT.
UNION FENOSA
UNITED UTILITIES
UPM-KYMMENE
VALEO
VALORA HOLDING
VIVENDI UNIVERSAL
VNU
VODAFONE GROUP
VOLKSWAGEN
VOLVO 'A'
VONTOBEL HOLDING NOM.
WOLTERS KLUWER C.ACT.
WPP GROUP
ZEHNDER GROUP PORT.
ZELLWEGER LUWA PORT.
ZSCHOKKE HOLDING NOM.
ZURICH FINANCIAL SERVICES NOM.
INDUS
BANKS
TECHHW
MATRLS
HEALTH
UTILIT
INSURE
CAPGDS
MATRLS
BANKS
CONSDU
TELECO
CAPGDS
TELECO
HEALTH
TELECO
TELECO
TELECO
MEDIA
FOODDR
CAPGDS
MATRLS
TELECO
ENERGY
TRANSP
LEISUR
BANKS
PHARMB
TECHHW
BANKS
HEALTH
FOODBE
UTILIT
UTILIT
MATRLS
AUTO
RETAIL
MEDIA
MEDIA
TELECO
AUTO
CAPGDS
DIVFIN
MEDIA
MEDIA
CAPGDS
CAPGDS
CAPGDS
INSURE
CTRY
UKI
FRA
FIN
SWI
FRA
SWI
SWI
SWE
SWE
SWI
SWI
SWI
DEN
SWI
SWE
ITA
SPA
FRA
UKI
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Extracting value through factor analysis

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