Sustainability Worth $20-25 Billion to Utility Investors

Hauppauge, N.Y. - May 23, 2012 (News Release)

Target Rock Advisors, LLC today released the results of an analysis suggesting that the value of good sustainability policies and practices could be worth between $20-25 billion to utility investors. This first-of-a-kind estimate was based on a comparative analysis of the total returns over ten years for the 49 U.S.-domiciled utilities included in Target Rock’s 2012 sustainability rankings and indexes, previously released on February 14, 2012.

“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 over the ten years ended December 31, 2011,” stated Richard Rudden, chief executive at Target Rock. “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. Our analysis makes another compelling case for sustainable and socially responsible investing in the utility sector.”

The $20-25 billion estimate reflects the 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-year period 12/31/01-12/31/11. That represents approximately 10% of beginning market capitalization or roughly 1% per year on average.

“While the precision of this estimate is necessarily limited by the universal complexity of sustainability assessment, it does provide an informed effort to place direction and boundaries around the potential industry-wide shareholder value of sustainability as measured by market capitalization metrics,” stated Kyle Rudden, a Target Rock Partner and co-founder.

“This analysis indicates that utilities’ sustainability efforts contributed positively to long-term total returns, even if relatively modestly,” he added. “It is important to keep in mind that this analysis includes a period of time, particularly the earlier years, when only a handful of the most progressive utilities had sustainability plans in place. 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.”

“The $20-25 billion estimate is a relevant indicator of shareholder value but I think it grossly understates the true economic value of sustainability since market capitalization metrics do not capture socio-economic benefits – including but not limited to reductions in pollution and water use and contributions to local economic health and development – created by utilities but accrued to others and society as a whole.”

The results of Target Rock’s analysis are contained in a Research Note titled “The Value of Sustainability: At Least $20-25 Billion for Utility Investors” posted on the company’s website, http://www.targetrockadvisors.com/research-reports/.

ABOUT TARGET ROCK

Target Rock is dedicated to the rigorous study and implementation of sustainability policies and practices within the utility and financial industries. The Company’s mission is to provide data, information, analytical systems and deep sector-specific technical expertise that identifies areas for improved performance and helps utility companies achieve their sustainability objectives with favorable social and economic outcomes. Through its partners and associates, Target Rock has over 250 years of combined experience in sustainability and executive leadership, equities and fixed income analysis, financial management, statistics and econometrics, regulatory policy analysis and management consulting.

Richard J. Rudden, Target Rock’s CEO and co-founder has served in analytical, consulting, management and executive positions within the utility, financial and energy industries for over 35 years. As a senior vice president for a multi-billion dollar global consulting and engineering firm, he lead the company’s energy sector management and strategy consulting practice, chaired its climate change working group, and was a member of both the Advisory Board and Sustainability Steering Committee. Richard has published and spoken widely and has testified before state, federal, and provincial regulatory bodies, as well as in bankruptcy and civil court proceedings, on natural gas and electric economic, financial and policy issues. Previously he was the founding CEO of R.J. Rudden Associates, Inc., a strategy and economics consulting firm, and R.J. Rudden Financial, LLC, a FINRA-licensed broker-dealer providing services to the energy industry; R.J. Rudden was acquired by Black & Veatch in 2005. Richard’s career includes management and executive positions at Con Edison, Stone & Webster (now Shaw) and Black & Veatch. He has also served on the Boards of Directors of the North American Energy Standards Board, a non-regulated retail energy marketer and the Cornell Cooperative Extension, where he is a member of the executive committee. He has also been involved in Cornell’s Marine and related environmental programs.

Kyle P. Rudden, Partner and co-founder, has 15 years of experience in equity and fixed income analysis, with an emphasis on finance and capital markets. Most recently, he was president of R. J. Rudden Financial, LLC, a registered broker-dealer and energy industry advisory boutique. Before co-founding Rudden Financial, Kyle spent nearly a decade at J.P. Morgan Securities as vice president and head of the firm’s U.S. Energy and Utilities Equity Research team covering electric and natural gas utilities, pipelines, independent power and new energy technology. Prior to J.P. Morgan, Kyle was a fixed income analyst at Fitch Ratings, also covering the U.S. electric and natural gas utility industries. At J.P. Morgan, he was named in both Institutional Investor and the Wall Street Journal annual lists of top analysts and participated in a number of large domestic and international equity and equity derivative underwritings, including initial public offerings, public secondary offerings and private placements.

Contact:

Richard Rudden,
Target Rock Advisors, LLC
631-439-6835

Kyle Rudden,
Target Rock Advisors, LLC
631-439-6835

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