A dramatic change in the ethical investment profile of the tech sector gets underway today with Dow Jones Sustainability Index (DJSI) dumping HP and Microsoft from its listing. The DJSI is probably the most important investment rating for sustainability performance in the market due to its comprehensive methodology and wide take up by institutional investors seeking to keep the risk associated with less sustainable business models & practices out of its investment portfolio.
This will come as another blow for HP senior management though it can't be completely unexpected. Earlier this year HP's sustainability report recorded a ratcheting down of social investment & supply chain due diligence and a less than muscular approach to conflict minerals.
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Microsoft has fallen into a rather different mode of decline in recent years. First it has developed an inconsistent record on sustainability reporting - it had abandoned annual reporting against generally accepted standards before announcing an intent to resume. Next, its strategy has become confused with different centres variously advocating corporate citizenship, corporate environment performance as well as green solutions. And yet the overall strategy remains elusive. Also, Microsoft has come under fire for adopting environmental targets linked to unit of revenue rather than absolute reductions.
Its a big turn around in just a few short years from when these two titans set the standard on sustainability for the tech sector. The market impact of this move is not insignificant. On its corporate citizenship web pages HP sums up the importance of ethical investors:
HP is among the top 15 companies most widely held by socially responsible investor (SRI) funds, and there are more than 100 SRI funds that hold HP shares.......We expect that providing information about HP's global citizenship performance demonstrates that HP is an attractive long-term investment, which encourages investment in HP and facilitates access to capital.
On a brighter note - Alcatel Lucent, NTT DoCoMo, EMC, Sprint Nextel & Xerox are added to the index while Samsung takes tech sector leadership overall.