We live in an age of activism. The recent federal election was deemed "The Climate Change Election" and as I am writing this, young Greta Thunberg is visiting the glaciers near Jasper, hearing from local scientists who study the glacial patterns. These movements aren't necessarily anything new as the world has seen it's fair share of activism in the past but the mobilization across the planet through the use of digital media is likely unprecedented.
This is leading to very powerful consumer trends which as mentioned played a definitive role in the election, but it is also playing a role in the profitability of companies. Just like mom and dad always taught me, it turns out that doing the right thing does pay! Just Capital is a non-profit whose purpose is to transform the way America does business. They track and report on "just behavior" among the largest US public firms and ranks them accordingly.
In order to determine what the public considers to be good behavior they poll people on a regular basis, 50,000 Americans at a time and ask questions like, is pollution important? Are higher wages important? Do benefits matter? And they go into more detail from there. Recently I came across a report that they issued a few years ago which reaffirmed one of my core beliefs that companies who act ethically, or are more just, are also more profitable than others.
The study found that in 2016 the Just Capital's top 100 ranking of most just companies outperformed the Russell 1000 index over the previous decade by 1-4 percentage points. Now, 10 years is not a long period of time when it comes to the markets but this is a fairly large sample size of companies and with the consumer trends mentioned above continuing to emerge there is reason to believe that this could continue well into the future.
Just Capital also determined that on average, companies on their top 100 list also:
Generated higher return on investment capital, approximately 3.5% per year
Pay workers a higher living wage
Have more women in board seats
Create more jobs, approximately 1.8 times more
Provide more flexible work hours
Pay 8X less fines
Recycle 3X more waste
Donate about 2X as much of their profits to charity
When you consider the fact that these companies are spending way more on their employees and on their commitments to the community, it makes their profitability figures that much more impressive, but maybe not surprising. Ethical companies are making the decision to invest more in their employees, and it is no secret that happy employees who are feeling fulfilled in their role are going to be more committed to the company's mission.
Additionally, these companies are taking a longer-term approach to their strategic planning, unlike many of their competitors who are stuck on the quarterly hamster wheel and a slave financial reporting. In a world that is full of competition it is often difficult to differentiate crest from Colgate, or one Canadian bank from another. What some have found out is that their key differentiating principle is not the products they produce but what they stand for as a community and global participant.
As Maya Angelou said, "people will forget what you said, people will forget what you did, but people will never forget how you made them feel." She was speaking about individual people when she said that, but it applies to companies as well. Some companies have figured this out and their shareholders are benefitting from it in a big way. Ultimately this should serve as a wake-up call for all companies to do the right thing. It's what's best for your community, for your customers/clients and the other good news is that it's good for profitability as well. For more information on Just Capital go you https://justcapital.com/
-Grant White, CIM, CFP
Grant White is a Portfolio Manager/Investment Advisor at Endeavour Wealth Management with Industrial Alliance Securities Inc, an award-winning office as recognized by the Carson Group. Together with his partners he provides comprehensive wealth management planning for business owners, professionals and individual families.
This information has been prepared by Grant White who is a Portfolio Manager for Industrial Alliance Securities Inc. (iA Securities) and does not necessarily reflect the opinion of iA Securities. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Portfolio Manager can open accounts only in the provinces in which they are registered.
Over the last year, I have referred to these markets many times as being predatory. They lure even the most experienced investor into feeling a...
May 24, 2022
Increasing the value of a business is a primary focus for nearly every business owner. It doesn’t matter if you’re a retail store, manufacturing...
May 19, 2022
For many incorporated professionals, their private corporations play a key role in saving for their family and their future retirement. In 2018, the..
May 9, 2022
Doctors & Dentists – Should you buy or lease their cars? What's the future of Facebook? Could China's real estate bubble produce 2008 like events? What do the big banks' investment changes mean for customers?
October 5, 2021
In this episode, Dennis Rubeniuk and Grant White will discuss the recent changes to the MB Pension Benefits Act and how they will impact your retirement.
October 5, 2021