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Sustensis

Research Centre for Business Sustainability

 

 

 

Long-term Growth Potential Index

 

Long-term Growth Potential® (LGP) patent-pending index can help investors and companies compare a company’s potential for the long-term growth against its competitors and supports the Long-term Growth Potential Review service. It measures, using the company’s own data, the impact of the company’s strategy, innovation, leadership and other of the 15 Growth Categories and 245 strictly non-financial indicators (intangibles), on the long-term growth and business competitiveness.

LGP index is based on Public Assessments, which are fact-based (not based on perception), using only public data and therefore their results can be fully disclosed in the public domain. The assessed company does not have to supply any information, although it may do so, if it consents to full public disclosure of data. In the last few years, we have been continuously assessing nearly 3000 global companies.

LGP value represents a relative long-term growth potential (i.e. it is not an absolute growth but relative to the highest scoring company in the index). The index covers the following areas:

· Long-term Growth Potential (10 Categories, 122 indicators)

· Growth Balance (2 categories 51 indicators)

· Corporate Governance and Transparency (40 indicators)

· Business Ethics (31 indicators)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The index could be attractive first of all for selecting long-term assets since it would reduce the overall investment risk. It has a high correlation approaching +0.8 with the long-term financial results (measured over 5 years). Many analysts use some intangibles/non-financial criteria for selecting investment assets. However, since these non-financial criteria are mixed together with financial criteria, it is almost impossible to make a consistent comparison of the impact of non-financial criteria on the potential attractiveness of an investment. A complete separation of financial analysis from non-financial (qualitative) analysis, which LGP index enables, allows a consistent valuation of the same assets from two different perspectives, thus reducing the overall investment risk.

Additionally, since LGP differs fundamentally from such indices as FTSE4good or DJSI, which are both based on subjective judgment and include negative screening, it can be used for selecting SRI and “ethical” assets. Companies with high LGP index value would be by default best SRI/CSR companies because business managed for the long-term growth (sustainable business) must meet all typical CSR criteria. Many investors have been looking for investing in socially responsible business but which at the same time would also deliver higher performance. LGP Index would enable investors select such long-term assets.

Apart from that, LGP index can be used for over 10 other applications such as: re-evaluating share value, verifying company’s strategy, comparing company’s competitiveness, applying LGP before and after the M&A, using LGP for investment portfolio valuation (especially for pension funds), etc.

Finally, Sustensis has developed, within its patent-pending solution, the Intangibles Share Pricing Method® for calculating the future share value based on the Fundamental Value and the LGP index value.

 

 

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