Study Shows Eco-Efficiency Yields Healthy Returns on Pharmaceuticals’ Stock

Study Shows Eco-Efficiency Yields Healthy Returns on Pharmaceuticals’ Stock

Pharmaceutical companies with superior environmental performance have outperformed laggards by 17% in the stock market over the past year, according to a new study. The study, by Innovest Strategic Value Advisors studied 29 pharmaceutical companies in the U.S., Europe and Japan.

The analysis was conducted using Innovest's EcoValue'21 environmental performance rating model, which analyzes more than 60 aspects of environmental risk exposure, management quality, and business development. According to Innovest, investor risk exposure related to environmental issues is growing due to factors such as increasing regulation, growing consumer demands for environmentally responsible products and services, increasing public concerns about global warming and other environmental problems, and expanding information transparency through the internet, which makes it easier for stakeholders to identify a firm's negative impacts on the environment.

Bristol Myers Squibb achieved the top ranking with Innovest despite the fact that the company saw its stock drop by over 60%. During the past year, Bristol-Myers Squibb along with others in the industry have issued profit warnings because of expired patents, risky business deals with biotechnology companies and a lack of approved new drugs. (Bristol-Myers invested $2bn in ImClone in August 2001, hoping to develop a promising colon cancer drug, which was rejected by the FDA in December 2002.) In spite of a dismal six months for the company, Innovest still believes that Bristol-Myers Squibb is likely to rebound to pre-crisis levels due to a superior quality of management and strategic integration of environmental sustainability issues, as detected by Innovest proprietary EcoValue21® rating model.

Bristol-Myers considers that constructive action to support a clean and healthy environment is essential to achieving its corporate goals. Its environmental management system covers all aspects of the entire value chain. BMY already has 22 sites ISO14001 certified and more in the pipeline. It has an integrated environmental accounting system that allows for cost/benefit analysis of its EHS initiatives. BMY is also one of the few companies with a public policy addressing environmental and ethical issues associated with bio-prospecting.

At the other end of the spectrum, Elan Corporation obtained the lowest rating with EcoValue21®, Innovest's proprietary analysis platform. Elan is an environmental laggard in its sector, as reflected by the company's incapacity to communicate anything about the state of environmental management and practices at its facilities. This demonstrates a lack of corporate vision and pro-activeness in creating strategic profit opportunities. Elan Corporation obtained a 'CCC', Innovest's lowest Eco-Value21 rating.