FAQ | Corporate Knights

Global 100 ranking FAQ

CK Staff — Mon, 21 Jan 2019 16:30:32 +0000

How is this ranking calculated?
The ranking starts with identification of all publicly listed companies who had at least US$1B in revenues in the last fiscal year. They are screened for adequate performance disclosure, good financial health, and non-engagement in defined businesses and practices (e.g. weapons and tobacco manufacturing). The resulting shortlisted companies are scored on a mix and weighting of up to 21 performance metrics, tailored to their sector/peer group. The final G100 represents the top performers from each sector/peer group, with the number from each sector based on the relative size of its global market capitalization. See our 2019 Global 100 Methodology for more details.

What are the specific metrics/calculations that go into the ranking?

There are a total of 21 performance metrics covering resource management, employee management, clean revenue and supplier performance. The mix and weighting used is tailored to each sector/peer group. See our 2019 Global 100 Methodology for more information.

Is it valid to rank companies from such vastly different sectors against each other?
Rankings are based on high-level metrics – carbon emissions, pay equity and diversity, for example – that are recognized as broadly relevant to corporate sustainability, and that lend themselves to objective measurement. The mix and weighting of metrics is then tailored to each sector/peer group. So while carbon emissions matter to all companies, they have a greater bearing on the ranking of a mining company than of a bank. For the 2019 ranking, further refinements were made to peer group definitions to better ensure they are a basis for apples-to-apples comparisons. A fixed number of slots on the Global 100 is also assigned to each peer group, based on the relative size of its global market capitalization.

What is meant by “clean revenue”, and why does it account for so much of the ranking?
Corporate Knights uses an open-source and evolving taxonomy to define products and services that are socially and environmentally beneficial. This taxonomy is informed by a wide range of research and recommendations drawn from numerous governmental, academic and other sources. A full list of products and services is available at the “2019 Global 100 methodology” link at: corporateknights.com/reports/global-100/ Generating clean revenue is seen as a strong indicator of both contributions to addressing key social and environmental challenges, and of likely corporate longevity.

Is there an application/nomination process?
No. Corporate Knights conducts the analysis on as comprehensive a basis as possible, including all publicly listed global companies with annual revenues of US$1B or more, and who pass the screening criteria. Qualifying companies do not have to apply or be nominated, and are assessed whether they wish to be or not. No submissions are required, although Corporate Knights offers shortlisted companies an opportunity to validate data. This year, the total sample assessed included approximately 7,500 corporations.

What was the basis for a company’s inclusion on this ranking?

Refer to our spreadsheet providing specific scoring for all ranked companies in 2019. See Global 100 Results (available January 22, 6am GMT +1).

How have companies been ranked in the past?
Rankings from past years are available at: corporateknights.com/reports/global-100/

How do companies compare to their peers?

Peer rankings are available for all ranked companies in 2019. See Global 100 Results (available January 22, 6am GMT +1).

Who is the organization behind the ranking?
Corporate Knights is a publishing and research firm based in Toronto, Canada. It publishes the world’s largest circulating magazine focused on sustainability and responsible business; and its research division develops corporate ratings, and investment product ratings and tools. Its research also powers various external initiatives including the Global Green Financial Index. Corporate Knights was founded in 2002 and is an employee-owned B Corp.

How long has this ranking been in existence?
The Global 100 ranking was first produced in 2005, and has been updated on an annual basis ever since. This most recent ranking is the 15th version to be released.

What makes this ranking credible?
The Global 100 is a comprehensive and well-established ranking, and is closely tracked by institutional investors and other stakeholders interested in corporate sustainability. The methodology is fully transparent and has been continually refined to improve the comparability and precision of the outcomes, and to leverage evolving data availability and understandings of key determinants of corporate sustainability. The Global 100 is based on an objective, replicable assessment of publicly available data, rather than on any subjective determinations. While there are various similar rankings, the Global 100 is distinctive in its scope, and has earned third-party recognition for its rigourousness. A panel of independent experts regularly provides input to guide further refinement of Global 100 methodology.

When does the ranking come out?

The 2019 Global 100 Results will be available January 22, 6am GMT +1.

The post Global 100 ranking FAQ appeared first on Corporate Knights.

FAQs

CK Staff — Wed, 22 Jan 2014 18:59:46 +0000

On this page we provide answers to some of our most frequently asked questions. If you have a question about the Global 100 that is not listed below, please contact us at capital@corporateknights.com.

How is the Global 100 determined?

The Global 100 process begins each year on October 1^st, when the starting universe for the index is established. Companies in the starting universe are put through four screens, and the companies that emerge constitute the Global 100 Shortlist. Companies in the Shortlist are then scored on the priority key performance indicators (KPIs) for their particular GICS Industry Group. The top overall performers from each GICS Sector are named to the final Global 100, subject to the number of slots reserved for each GICS Sector.

What are the 12 KPIs used to evaluate companies in the Global 100?

The 12 KPIs used in the Global 100 provide a comprehensive measure of companies’ sustainability performance. The KPIs are described here. View a more detailed explanation of the 2014 methodology.

How does a company make it into the starting universe?

The starting universe is set each year on October 1^st. All publicly-traded companies worldwide that have a market capitalization in excess of US$ 2 billion as of October 1^st are automatically included in the starting universe.

What happens if a Global 100 company is delisted?

If a company that is part of the Global 100 index is delisted, its index position will be reinvested equally across the surviving index members. For instance, on February 4, 2014, Life Technologies Corp, a Global 100 company, was delisted from Nasdaq because it was acquired by Thermo Fisher Scientific. At the close of trading on Feburary 4, the stock was deleted from the Global 100 index and its weight was distributed equally to the surviving 99 index members.

What are the four screens that you use to reduce the starting universe to the Global 100 shortlist?

The four screens are summarized below:

1. Sustainability disclosure

The first screen eliminates companies that are not keeping pace with the sustainability reporting trends in their industry. Companies that fail to disclose at least 75% of the Priority KPIs for their respective GICS Industry Group are eliminated at this point in the project.

2. F-Score

The F-Score, also known as the Piotroski F-Score, is a financial assessment that consists of nine individual tests. Companies have to pass at least five of these 9 to pass this screen.

3. Product category

Companies with a GICS Sub-Industry classification equal to “Tobacco” are eliminated. Companies with a GICS Sub-Industry classification equal to “Aerospace & Defence” are revenue-tested; if a company derives a majority of its revenue from its Defence business group (e.g. weapons manufacturing), it is eliminated.

4. Sanctions

The Sanctions screen looks at the dollar amount that companies have paid out in sustainability-related fines, penalties or settlements. If the total amount of a company’s fines, penalties and settlements as a percentage of total revenue during the previous 12 month period (from October 1st) is found to be in the bottom quartile compared to GICS Industry Group peers, the company is removed from the Global 100.

What is a priority KPI?

A priority KPI is any of the 12 KPIs used in the Global 100 that is disclosed by at least 10% of all companies globally in a given GICS Industry Group. Click here to see the priority KPIs for each GICS Industry Group.

Why do you reserve slots for each GICS Sector in the Global 100?

Slots are reserved for each GICS Sector so that the industry composition of the Global 100 matches that of the Global 100’s financial benchmark, the MSCI All Country World Index (ACWI). Slots are reserved on the basis of each Sector’s contribution to the total market capitalization of the MSCI ACWI. For instance, if Energy companies were found to represent 10% of the total market capitalization of the MSCI ACWI, 10 slots would be reserved for companies in the GICS Energy sector.

For more information on the MSCI ACWI, please click here.

How is the Global 100 different from other corporate sustainability rankings?

Unlike many other sustainability rankings, the Global 100 uses a clear set of key performance indicators (KPIs) to determine index constituents. The KPIs are informed by publicly available data, such that the index construction methodology of the Global 100 is fully replicable. Another defining feature of the Global 100 is its industry-specific focus; companies are only compared against their industry group peers.

How can you compare a bank to a mining company? Their operations are completely different.

The short answer: the Global 100 does not compare a bank to a mining company. A company’s performance is only compared against other GICS Industry Group peers. Therefore, banks are only assessed against other banks, and mining companies are only assessed against other mining companies.

Moreover, the Global 100 recognizes the fact that sustainability reporting practices differ among GICS Industry Groups. In order to address those differences, companies are only assessed on the priority KPIs in their respective GICS industry group.

Where do you get your data?

We collect most of our data from corporate sustainability reports, financial statements, MD&A disclosures and proxy statements. Data are collected through a combination of primary research and secondary research (Bloomberg).

How are the KPIs weighted?

KPIs are weighted evenly. For example, if there are 7 priority KPIs for the GICS Energy Sector, then each KPI will be assigned a weight of (100%/7 = 14%).

What happens if a company doesn’t disclose a data point?

It depends. If a company does not disclose a non-priority KPI, there is no bearing on its score. If a company does not disclose a priority KPI, it effectively receives a score of 0 for that KPI, thereby reducing the probability that it will qualify for the Global 100.

How does the Global 100 correspond with the GRI?

All 12 KPIs used in the Global 100 have corresponding GRI codes.

What year’s data is considered in your rankings?

The 2014 Global 100 uses 2012 performance year data.

Does the Global 100 methodology change from year to year?

Yes, the methodology is updated from year to year to reflect substantive changes in corporate reporting practices as well as new information and data about the financial materiality of all KPI-Industry Group match ups. We engage with various stakeholders, including the Global 100 Council of Experts, before making any changes to the Global 100 methodology.

Can I invest in the Global 100?

For more information about how to invest in the Global 100, please contact Corporate Knights at capital@corporateknights.com

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