Sustainable and socially responsible operating procedures by U.S.-based utility companies are worth between $20 billion and $25 billion to investors over the last 10 years, or about 10% for that time period, says Target Rock Advisors LLC based in Hauppauge, N.Y.

Target Rock studies and provides technical expertise for utility companies to implement sustainable and socially responsible practices. It had announced earlier that using sustainable practices brings greater investor rewards and has now put a price tag on that activity.

Sustainable operations amount to about 1% a year for utility investors, Target Rock says, when measured over a 10-year period ending Dec. 31, 2011.

It must be taken into consideration that at the beginning of that time period most utility companies were not concerned with sustainable operations.

"The impact of sustainability practices on shareholder returns could be more substantial over the next decade now that more utilities are taking the issues seriously," says Kyle Rudden, a Target Rock partner and co-founder.
In addition, the increased value placed on stocks does not take into consideration the further social benefits of sustainable operations, such as decreased air pollution, water use and contributions to local economic health and development, Rudden says.

The $20 billion to $25 billion estimate reflects incremental market value realized by the Target Rock High Sustainability Index relative to lower-performing utilities, plus the opportunity cost associated with being less sustainable for the Medium and Low Sustainability Indexes over the ten years. That represents approximately 10% of beginning market capitalization.

"Earlier this year, we demonstrated that as a group the stocks of utilities that scored highly in Target Rock's sustainability rankings outperformed companies with lower sustainability performance. Now we have been able to place an estimate around the potential value that improved sustainability practices might bring to utility equities and it is not insignificant," says Richard Rudden, chief executive at Target Rock.

"This analysis indicates that utilities sustainability efforts contributed positively to long-term total returns, even if relatively modestly," Kyle Rudden says.