Sustainability Worth $20-25 Billion to Utility Investors: Billions More to Society Likely

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Target Rock Advisors, LLC estimates that the value of good sustainability policies and practices contributed to $20-25 billion in incremental market value for utility investors over the last ten years. The impact of sustainability practices on shareholder returns could be even greater going forward now that more utilities are taking the issues seriously.

Target Rock Advisors, LLC today released the results of an analysis suggesting that the value of good sustainability policies and practices could be worth between $20-25 billion to utility investors. This first-of-a-kind estimate was based on a comparative analysis of the total returns over ten years for the 49 U.S.-domiciled utilities included in Target Rock’s 2012 sustainability rankings and indexes, previously released on February 14, 2012.

“Earlier this year, we demonstrated that as a group the stocks of utilities that scored highly in Target Rock’s sustainability rankings outperformed companies with lower sustainability performance over the ten years ended December 31, 2011,” stated Richard Rudden, chief executive at Target Rock. “Now, we have been able to place an estimate around the potential value that improved sustainability practices might bring to utility equities, and it is not insignificant. Our analysis makes another compelling case for sustainable and socially responsible investing in the utility sector.”

The $20-25 billion estimate reflects the incremental market value realized by the Target Rock High Sustainability Index relative to lower-performing utilities, plus the opportunity cost associated with being less sustainable for the Medium and Low Sustainability Indexes over the ten-year period 12/31/01-12/31/11. That represents approximately 10% of beginning market capitalization or roughly 1% per year on average.

“While the precision of this estimate is necessarily limited by the universal complexity of sustainability assessment, it does provide an informed effort to place direction and boundaries around the potential industry-wide shareholder value of sustainability as measured by market capitalization metrics,” stated Kyle Rudden, a Target Rock Partner and co-founder.

“This analysis indicates that utilities’ sustainability efforts contributed positively to long-term total returns, even if relatively modestly,” he added. “It is important to keep in mind that this analysis includes a period of time, particularly the earlier years, when only a handful of the most progressive utilities had sustainability plans in place. The impact of sustainability practices on shareholder returns could be more substantial over the next decade now that more utilities are taking the issues seriously.”

“The $20-25 billion estimate is a relevant indicator of shareholder value but I think it grossly understates the true economic value of sustainability since market capitalization metrics do not capture socio-economic benefits – including but not limited to reductions in pollution and water use and contributions to local economic health and development – created by utilities but accrued to others and society as a whole.”

The results of Target Rock’s analysis are contained in a Research Note titled “The Value of Sustainability: At Least $20-25 Billion for Utility Investors” posted on the company’s website,

About Target Rock

Target Rock is dedicated to the rigorous study and implementation of sustainability policies and practices within the utility and financial industries. The Company’s mission is to provide data, information, analytical systems and deep sector-specific technical expertise that identifies areas for improved performance and helps utility companies achieve their sustainability objectives with favorable social and economic outcomes. Through its partners and associates, Target Rock has over 250 years of combined experience in sustainability and executive leadership, equities and fixed income analysis, financial management, statistics and econometrics, regulatory policy analysis and management consulting.

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