The financial services market of sustainability (e.g. sustainability indices) has been developed as a requirement to support responsible investors (SRI) in the investment decision making process.
The majority of sustainability indices is established by Data providers/Index Providers that define an ESG methodology to select the companies to be included in those indices.
Sustainability indexes are an important tool for EDP to the extent that they allow the company’s sustainability performance to be measured and make a contribution to the continuous improvement of its operations, particularly in terms of its market orientation.
EDP obtained the following scores:
Results of the 2019 sustainability assessment
* Ratings are independent and, therefore, should not be compared.
** In accordance with a robust materiality framework, Sustainalytics' ESG risk rating provides a quantitative measure of unmanaged ESG risk and distinguishes between five levels of risk: negligible, low, medium, high and severe. The rating scale goes from 0-100, where 100 is the most severe.
EDP is present in the following indexes:
EDP is present in the Ethibel EXCELLENCE Investment Register, a group of companies that perform above average in their sector of activity. The assessment is made taking into account corporate social responsibility (CSR) criteria. The information is collected by Vigeo and surveys are also carried out with the relevant stakeholders for the companies. EDP is also part of the Ethibel Sustainability Index (ESI) Excellence Europe, an index that includes only companies that are part of investment records. The indexes are owned by Vigeo, but are established by the ETHIBEL Forum, a Belgian non-profit organisation whose objective is socially responsible investment (SRI).
EDP is included in the Sustainability Euronext Vigeo - World 120, Europe 120, and Eurozone 120 Indexes.
Each of these indexes distinguishes 120 listed companies for their ESG (Environmental, Social and Governance) performance, assessed based on publicly collected information which is compiled in a report sent to the companies for validation and commentary.
This index family was launched jointly by Vigeo and NYSE Euronext. The first entity, together with EIRIS, is responsible for gathering information and the periodic selection of member companies of the indexes. NYSE Euronext acts as supervisor of the indexes, monitoring the selection of the members and ensuring that indexing reflects a reliable view of the market.
EDP belongs to the FTSE4Good Global Index. The evaluation made was based on completion of a questionnaire sent to companies by FTSE/Russell. ESG (Environmental, Social and Governance) aspects were considered along with the exposure to risk associated with the sector and the geographic location of business operation - FTSE ESG Ratings. The series of FTSE4Good indexes are constructed by FTSE, a company member of the London Stock Exchange Group.
EDP is part of a set of Morgan Stanley Capital International indexes, namely World ESG, Europe ESG, World Low Carbon Leaders and ACWI Low Carbon Leaders Indexes, which were confirmed in early 2016. One of the evaluation criteria was based on the request for quantitative ESG (Environmental, Social and Governance) information from companies.
Dow Jones Sustainability Index
Sustainability Indexes are an important tool for EDP because they allow the quantification of the company’s sustainability performance, they contribute to the continuous improvement of operations and they guide the business according to market trends and challenges.
In a very selective and demanding way, this index evaluates the sustainability performance of companies and their adaptation to market trends.
EDP scored 90 points, which was higher than the score obtained in 2018 by 5 points and higher than the average industry score by 45 points.
EDP is leader among integrated utilities and it ranked second among the utilities on a global level.
Despite its improvement potential, two areas that contributed for this result in 2019 were: Corporate Governance and Prevention, Health and Safety at work.
EDP was recognized by RobecoSAM as having the best practices on the following subjects: Climate Change, Environmental Reporting, Water Related Risks, Stakeholder Engagement, Corporate Citizenship, Materiality, Social Reporting, Human Rights, Policy Influence.
Globally, this index comprises 318 companies from different sectors, including 8 electric utilities. The European index comprises 142 companies from various sectors, including 3 electrical utilities.
For the 12th time, EDP is among the 8 most sustainable electric utilities in the world and the 3 European utilities with the best sustainability performance.
Dow Jones Sustainability Index
Sustainability Indexes are an important tool for EDP because they allow the quantification of the company’s sustainability performance, they contribute to the continuous improvement of operations and they orient the business in terms of market trends and challenges.
This index evaluates, in a very selective and demanding way, the sustainability performance of companies and their adaptation to market trends.
EDP scored 85 points. It is lower than the score obtained in 2017 by 4 points, and higher than the industry average by 39 points. EDP excelled once again in the social dimension, with the industry's best score (89 points).
As for the integrated utilities universe, EDP has dropped from first to second. Regarding the electrical industry global ranking, the company has dropped 2 positions, from second to fourth.
Some of the criteria that have contributed to the electrical utilities ranking drop were: Customer Relationship Management and Operational Eco-Efficiency.
EDP stands out for being the best and for achieving the maximum score (100) in the following seven criteria: Materiality; Policy Influence; Environmental Reporting; Environmental Policy/Management System; Water-Related Risks; Corporate Citizenship/Philanthropy; and Stakeholder Engagement. It also stands out as the best company - although without the maximum score (100) - in the following criteria: Risk & Crisis Management, Talent Attraction & Retention, and Human Rights.
In 2017, EDP achieved a score of 91 (more 2 points than in 2016), 41 points above the average score of electric utilities. Thus, maintaining its position in the World Index for the 10th consecutive year and was selected by RobecoSAM to be part of DJSI Europe, where mark position for 8 years.
EDP, significantly improved the score in the environmental dimension by 9 points (in 2017 scores 91 points). The average score of electric utilities is 46 points. In the remaining dimensions the score was:
- economic; 89 (-3 comparing to 2016) - the average score of electric utilities was 51.
- social: 94 (-2 comparing to 2016) - the average score of electric utilities was 53.
This year, 2,086 listed companies were analyzed. 320 were included in the global index and 149 in the Europe index.
In 2016, EDP increased its score to 89 (against 83 in 2015), maintaining its position in the World Index for the 9th consecutive year. This year, 1,986 companies from the S & P Global BMI stock exchange were analyzed and less than 16% were included in the global index.
In 2009, EDP was selected for the second consecutive year for inclusion in the World and STOXX Dow Jones Sustainability Indexes and so became one of the top 13 companies in the electricity sector in the world and one of the 7 best companies at the European level.
EDP substantially improved its score, with an increase of about 9% compared to 2008 and reduced its distance from the new leader in the global sector, which leads it by only 2 points. EDP reached 100% in 6 of the 21 criteria evaluated: Risk Management, Price Risk Control, Score Card Systems, Stakeholder Engagement, Development of Human Capital and Environmental Reporting. EDP was still considered the best company in Biodiversity (98%) and Electricity Production (92%). The best practices are evaluated based on 21 criteria, divided into economic, environmental and social dimensions, and use either information provided by the applicant company or publicly available information.
EDP is a world leader in the Dow Jones Indexes of Sustainability among companies in the Electricity Sector. For the third year in a row, EDP is included in the Dow Jones Sustainability World Index and the European Dow Jones Europe Index.
EDP is the first Portuguese company to be a world leader in the Dow Jones Sustainability Indexes. The company maintained a prominent position in the leadership of Sustainable Development practices and is, for the first time, Best in Class in the Social Dimension.
It retains its leading position in the Social Dimension, for the first time being considered as Best in Class, reaching 89 points (4 more points than in 2009). It stands out in maintaining the maximum score in the criteria of Human Capital Development, Stakeholder Engagement and Social Reporting, and, for the first time, Best in Classwithout the maximum score in the criterion of Labor Practice Indicator.
In the Economic Dimension, EDP continues to be one of the best companies in the sector, maintaining its 2009 score (88 points), and winning Best in Class with the highest score (100) in the Price Risk Management Scorecards and Measurement Systems and Risk & Crisis Management criteria.
In the Environmental Dimension, its score of 77 points (3 points more than the previous year), EDP shows improvement in alignment with Sector practices as a result of efforts in the areas of environmental management, mainly regarding biodiversity and climate change strategy. The maximum score in the Biodiversity and Climate Strategy criteria and the best score in the Electricity Generation criterion all stand out.
In short, of a set of 22 criteria, EDP is Best in Class in 10, also achieving the maximum score in 8 of these.
For the second consecutive year, EDP is world leader in the Dow Jones Sustainability Index in the Electricity Companies Sector.
For the fourth year, EDP is present in the Dow Jones Sustainability World Index (DJSI World) and the Dow Jones Sustainability Europe Index (DJSI Europe), maintaining its position for the second consecutive year as a global leader in the Electricity Sector.
This year, the company achieved a rating of 86 points, increasing its rating by 2 points with respect to 2010 and being a world leader in the Social Dimension.
In the Economic Dimension, EDP continues to be one of the best companies in the sector.
The maintenance of the maximum score in the Risk & Management criterion deserves emphasis.
The improvement of our position in the Environmental Dimension corresponds to the improved alignment with best practices and is the result of efforts that have been developed, both in the area of the biodiversity and environmental management, as well as in the strategy with regards to climate change. The maximum score on Biodiversity and Climate Change should be highlighted.
Of a set of 22 criteria, EDP obtained best practice for 10 of these and reached the maximum score of 6.
EDP at the top of global sustainability
For the 5th consecutive year, the Group ranks among the electricity companies with the best performance in the Dow Jones Sustainability Indexes.
In 2012, EDP holds a high-performing position in the Dow Jones Sustainability Index, at both world and European levels, so appearing among the most sustainable power companies. In a world in which the average evaluation in 2012 was 61 points, the company achieved the highest rating ever with 87 points, equaling the leader of the electrical sector and of the supersector of utilities.
In areas such as integrated risk management; management control systems; biodiversity; the development of human capital; engagement with stakeholders and involvement with society in terms of corporate citizenship, it obtained a score of 100.
EDP is a Utilities world leader in the Dow Jones Sustainability indexes (DJSI). For the 6th consecutive year it is included in the DJSI World and Europe sustainability indexes.
In 2013, EDP is leader of Utilities: Electricity, Water and Gas, with the highest score for this index so far: 90 points.
In the Economic Dimension, EDP earned 91 points, one point below the leader. It obtained the best score (100) in the criteria for Price Risk Mangement, Risk & Crisis Management </i>and<i> Scorecards/Measurement Systems.
In the Environmental Dimension, it obtained the highest industry score (89 points) with the top score (100) for Biodiversity.
In the Social Dimension, with 90 points, it leads the industry with respect to Human Capital Development (100).
In 2014, EDP was included for the 7th consecutive year in the Dow Jones Sustainability Index (DJSI) with 88 points, being considered the leading corporation in the Utilities Industry Group: Electricity, Water and Gas.
In the economic dimension with 89 points, EDP holds the top score (100 points) in the criteria Price Risk Management, Risk & Crisis Management and Scorecards / Measurement Systems.
In the environmental dimension, apart from Biodiversity, a criterion in which EDP attained the highest score, the Water Related Risks criterion achieved significant improvement, attaining 100 points.
The company maintained its score in the social dimension, as well as in leadership of the Human Capital Development criterion.
EDP was included for the 8th consecutive year in the Dow Jones World Sustainability Index.
In 2015, 3,375 companies from the S&P Global BMI stock exchange were invited for analysis and less than 10% were included in the final index.
The inclusion of a company in these indexes brings it many benefits, both of a tangible and intangible nature. In addition to a public recognition of leadership in strategic areas of economic, environmental and social dimensions, there is also the important recognition of investors, clients and even legislators. Inclusion in the index is also an acknowledgment of balanced risk management.
For EDP, the effort of entering into the Dow Jones Sustainability Indexes also allows the design of clear and precise objectives in terms of sustainable operations.
The constant evaluation of the company and the updating of the criteria creates undeniable rigor in all areas of operations for the Group.
The company’s practices, assessed for inclusion in indexes, include such areas as:
- Value Creation (creating value for the Shareholder, increase in productivity and efficiency; commitment to focusing on the Client);
- Efficient use of resources;
- Environmental and Biodiversity Protection;
- Dialogue with stakeholders (open and transparent relationships with clients, investors, suppliers, and employees; credible reporting on the company’s performance in all areas);
- Human Capital Management (implementing systems to ensure the health, safety and welfare of employees, the promotion of the development of capabilities, and the rejection of abusive and discriminatory practices);
- Promoting access to energy;
- Support for Social Development.
The composition of the Sustainability Indexes stems from assessment made by RobecoSAM, a management entity for sustainable investment which evaluates and sorts the companies according to their degree of compliance in terms of the three dimensions of sustainability criteria: economic, social and environmental. The weight of each of these dimensions may vary annually according to best practices at each specific moment.
S&P Dow Jones the elaborates the indexes based on the classification made by RobecoSAM for sustainability by industry and industry group.
The sources of information used by RobecoSAM are:
- A rigorous questionnaire completed by the company and specific to each sector;
- Documents such as Annual Reports and Sustainability, Health and Security, Social, and Financial Reports and other company documentation;
- Media reports or those of other stakeholders and the available public information;
- Personal contact with the companies;
- Continuous monitoring of the companies for the components of the index, using public sources of information (e.g. Factiva; Reprisk).
The Dow Jones Sustainability Index emerged in 1999 as the first performance benchmark of leading companies in sustainability at a global level.
The companies recognized as part of the the Dow Jones Sustainability Index family are classified as those most able to create value for shareholders in the long term through the management of risks associated with economic, environmental, social and state governance factors.
The importance given by investors to this index reflects the growing concern of companies and other non-profit organizations for a sustainable world. Its financial performance is thus intrinsically associated with compliance with sustainability requirements which cut across all areas of business life and involve economic, social and environmental aspects.
The S&P Dow Jones Indexes and RobecoSAM developed the family of sustainability indexes which includes the global sustainability index (DJSI World), regional indexes (e.g. DJSI Europe) and country indexes (e.g. DJSI Chile):
- Dow Jones Sustainability World Index - This index brings together, for each industry, the global companies which are in the top 10% of the rating in terms of sustainability.
- Dow Jones Sustainability Europe Index - As an indicator for sustainable investments in Europe, the Dow Jones Sustainability Europe Index (DJSI Europe) brings together the leading companies in terms of Sustainability in Europe. The group of companies covered by this index includes those found in the top 20% of the classification in terms of sustainability.
- Dow Jones Sustainability North America Index, Dow Jones Sustainability Asia Pacific Index and Dow Jones Sustainability Index for Korea, Emerging Markets, Chile and Australia - These indexes bring together the companies classifying in the top 20% (the top 10% for Emerging Markets; the top 30% for Korea and Australia; the top 40% in the case of Chile) in terms of sustainability in the respective geographical areas.
The Data Providers/Index Providers are one of the main providers of non-financial information. The ESG rating market is very dynamic and these providers of non-financial information increasingly offer a diverse set of products and services to investors (e.g. ESG ratings, sustainability indices, controversy alerts, etc.).
ESG and low carbon indices listed in the financial market (1) (or suporting financial indices)
- A noncomprehensive list -
ESG Rating Agencies
(1) EDP may be present in others indices built by the different financial market actors (e.g. ESG indices built by Euronext). The knowledge of these indices does not depend of any initiative from the company.
(2) Since March 2018.
(3) Use of the exclusion criterium defined by Sustainalytics: Non-Compliance UN Global Compact principles; Involvement in Controversial Weapons (anti-personnel mines, biological and chemical weapons, cluster weapons, depleted uranium, nuclear weapons and white phosphorus); Tobacco Producers (0% revenue threshold); Thermal Coal (>25% revenue threshold from thermal coal mining and exploration; >25% power generating capacity/thermal coal electricity production).