firms, is a relatively small ratio. It’s not uncommon to see ratios of
250: 1, for instance, in the US.
CIO: Other companies had lower ratios of 7: 1 and 14: 1, why
choose Noble overall?
Morrow: We ended up with Noble because, in addition, it also had the
highest ESG score of the four, which we liked. It was 66/100. It’s more
about the idea that regulations in the US for disclosure of this type of
information might be tightening. And these are the types of companies
that investors can explore that are relatively well-positioned to comply.
CIO: How were you able to rate European tax evasion?
Morrow: It just has to do with the crackdown that’s taking place
CIO: Is that a relatively new rating?
in the EU over beneficial tax treatment. So, this all came to a head
in many investors’ minds back in August, when you may have seen
that the EU Commission found that Ireland had granted illegal tax
benefits to Apple, and ordered Apple to pay back $13 billion Euros
in taxes. This was not the first time. There’s a lot of history of the
EU Commission doing this type of thing. The EU bar is basically
rising and companies are going to find it difficult to increasingly
benefit from these types of arrangements. So, we looked at compa-
nies that had developed beyond compliance tax disclosure policies.
I realize it’s a little esoteric, but there are indicators that actually
measure this. So, we look at just how broad and how sophisticated
a company’s tax reporting is. All the companies on the shortlist are
going beyond compliance tax reporting in Europe, and providing a
country-by-country breakdown of taxes paid, things like that.
Morrow: I think momentum is accelerating because of things like
the Panama Papers. Obviously, that has raised everyone’s awareness about the whole scandal around hidden tax arrangements.
CIO: The report also talks about the prices of solar and wind
power. Where does that fit into this whole ESG equation?
Morrow: It’s definitely a global theme: the price competitiveness
of solar. It’s just absolutely remarkable how quickly solar and wind
have become essentially price competitive with fossil generation.
So, now, in the United States, for instance, solar utility scale projects are price competitive with fossil fuel generation. We see that as
being the primary driver in this market. So, utilities and households
are finding ways to boost their exposure to renewables, because it’s
an increasingly cost-competitive method of generating electricity.
PG&E we like for a bunch of reasons. We have an indicator
that looks at carbon-efficient energy mix. They have about 152
megawatts of their own solar capacity. And they also support over
200,000 of their own customers with private solar arrays. They’re
definitely among the most advanced US utilities on overall renewable strategy.
CIO: And why lithium ion batteries?
Morrow: The market’s surging due to electric vehicles. So, that’s
creating more demand. The whole market is just set to explode over
the next 10 years.
CIO: Are you also measuring the environmental impact of
the lithium ion batteries?
Morrow: We made that point in our paper because we think
it’s something that probably a lot of investors don’t think about.
Making and manufacturing lithium ion batteries can use a lot of
energy and toxic chemicals and things like that, so, we would say
investors need to be cognizant of these risks, and their potential to
cause supply chain disruption, but not withstanding these concerns,
we definitely see this as a major growth opportunity.
CIO: Why is Panasonic at the top of the list?
Morrow: Panasonic has about a 40% share of the global market
and the biggest exposure to lithium ion manufacturing. It performs
Key Insights from
Doug Morrow’s Research
■ Blockchain: An emerging leader in such applications, Barclays
is relatively well positioned to mitigate data privacy risks.
■ AV: BM W seems well prepared to respond to future regulations
on autonomous vehicles and hacking.
■ Cybersecurity: With the market for cybersecurity services
forecasted to reach $1 trillion 2021, Symantec is a pure-play
cybersecurity firm with ESG capabilities.
■ Solar: PG&E is a US utility provider with a strong upside
exposure to solar, already supporting 275,000 customers with
private solar arrays.
■ Energy Storage: Panasonic has a 40% share of the global
lithium-ion EV battery market.
■ Drug Pricing: With the increased scrutiny over drug pricing,
GSK is exploring value based pricing models and may be at a
■ Diverse Leadership: Females represent 35% of the board, and
25% of the executive leadership of Accenture, which make it
positively prepared for creating diverse leadership teams.
■ Plant-Based Proteins: Danone’s acquisition of White Wave,
puts it in a favorable position in the $1 trillion global health and
■ Tax Reporting: With new tax reporting standards eminent die to
lost revenues of €50–70 billion in the EU, firms such as BBVA are
well positioned to meet new standards.
■ Pay Disclosure: With average worker pay ration of 52: 1, Noble
Energy is ahead pay disclosure rules that may take effect in the
US this year.