Companies listed on the French CAC40 stock index have performed better in terms of environmental impact than firms listed on the German DAX index, according to an environmental, social and governance (ESG) impact review conducted by credit rating agency Scope.
The average environmental score calculated for companies on the CAC40 index was 6.5 out of 10, which represented the best mark for ESG impact, compared to 6.3 for the DAX.
The average ESG impact score for largest companies by market capitalisation on both indexes was 6.9.
The DAX excelled on other criteria that measure sustainability, with an average social score of 7.0 compared to 6.6 for the Paris-listed stocks, and 7.6 for governance compared to 6.6 for the CAC40.
According to the review, the average cost of the environmental impact of DAX firms stood at €0.15 for every euro of revenue, compared with €0.10 for the CAC40 index.
Diane Menville, head of ESG at Scope, said the analysis of ESG impacts was an early warning for portfolio managers.
The review looked at future regulatory risks and associated costs through the analysis of the current impact by factor, sector and geography.
ESG impact reviews were also a way for fund managers to conform with Sustainable Finance Disclosure Regulation (SFDR), she added.
The main drivers of negative ESG impact among DAX companies were listed as greenhouse-gas emissions and airborne pollution, while on the Paris stock exchange mainly water pollution and corruption result in negative effects on sustainability.
The geographic impact based on the two indexes shows that companies listed on the Frankfurt-based DAX are more concentrated in Europe (81.7% of the total), compared with 69.1% for the CAC40.
A larger number of multinational companies listed on the Paris stock exchange are instead active globally with international supply chains, particularly in the Asia-Pacific region. The environmental impact also depends on the sector.
Manufacturing companies listed on the DAX scored better that their peers on the Paris index, while the Score analysis found the opposite was true for companies in the apparel and textile, and transport and communications sectors.
The ESG impact score was based on an assessment of the cost of a company’s external activities, including supply chains.
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