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June 08, 2000
Bristol-Myers Squibb Leads Pharmaceutical Industry in "Eco-Efficiency"
In an Innovest report on the environmental performance the top 23 pharmaceutical companies in the
U.S., environmental leaders outperform laggards in the stock market.
SocialFunds.com --
Several recent studies have found a positive correlation between environmental and stock market
performance, indicating that environmental performance is both cost effective and an excellent
proxy for management quality. A recent study on the U.S. pharmaceutical sector, an industry where
there are many potential environmental impacts, is a powerful example.
 The pharmaceutical study was conducted by Innovest
Strategic Value Advisors, a New York-based financial services firm that rates corporate
environmental performance to project stock market returns. Innovest rated the top 23 pharmaceutical
companies from the S&P 500 and FTSE350, and found that companies with better than average
environmental performance outperformed other companies in the stock market.
"Perhaps more
than in any other sector, environmental issues in the pharmaceutical industry pose a complex
challenge to management and have the potential to significantly impact profitability and stock
market returns," stated the Innovest report. "Companies effectively addressing this high level of
complexity tend to do well in other parts of the business, and thereby earn superior stock market
returns."
Innovest investigated the companies' response to increasing environmental
regulations, growing market demands for more environmentally responsible products and corporate
policies, and numerous stakeholder issues. For instance, recent EPA regulations call for a 65
percent reduction of air toxin emissions from current levels, and companies that have cleaner
processes will be better equipped to meet these new regulations at the least cost.
Scientific uncertainty poses a complex challenge to pharmaceutical company management, such as
in the areas of biodiversity, genetic engineering, and patents on living organisms. Although
lacking the same biosafety issues of genetically modified organisms in the agricultural business,
genetic engineering in the pharmaceutical segment raise many bioethics issues of concern to
consumers and investors.
Innovest used their proprietary EcoValue'21 research platform to
analyze and weight over 60 environmental criteria, including environmental risks, business
development, environmental management, and reporting. Company managements varied widely on these
criteria, earning ratings ranging from "AAA" to "CCC," indicating their overall environmental
performance, or "eco-efficiency," and projecting corollary stock market returns.
The
highest rating went to Bristol-Myers Squibb Company, the world's number four pharmaceutical company
in terms of market capitalization and a corporate leader in supporting environmental issues in its
goals. The study found that Bristol-Myers Squibb had comprehensive environmental management, an
integrated environmental accounting systems and clear policy on the environmental and ethical
issues associated with bio-prospecting.
"We believe the confluence of environmental and
economic interests will continue to drive exceptional business performance in the future," said
Thomas Hellman, Vice President of Environment, Health & Safety for Bristol-Myers Squibb. "We at
Bristol-Myers Squibb have worked hard to support this premise and take great pride in our
environmental record." The company also recently won an award from the Environmental Action
Coalition, a New York-based urban environmental group, for its land stewardship and environmental
leadership.
At the other end of the spectrum, American Home Products (AHP) obtained
Innovest's lowest rating, a "CCC," with one of the worst compliance records in the industry.
Whereas most firms in the pharmaceutical sector annually publish a corporate environmental report,
AHP refuses to disclose any information that is not legally mandated, demonstrating a lack of
corporate vision on environmental performance.
But beyond the rating of individual
companies, the Innovest study also found that the companies with better-than-average environmental
performance outperformed their peers on the stock market by 15 percent over the year ending
February 2000. These results suggest, once again, that investor returns can be substantially
improved by investing in companies with superior environmental performance.
According to
the report, "As environmental regulations and market demands for more environmentally responsible
products, services, and corporate policies continue to increase, it is likely that stock market
differentials between companies with above average EcoValue'21 ratings and those with below average
ratings will continue to grow."
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SRI World Group, Inc. All Rights Reserved.
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