Does a focus on sustainability create shareholder value?

Researchers are increasingly becoming interested in the topic of impact investment and how it can be positive for both society and investors.

Just recently, Robert G. Eccles, Ioannis Ioannou and George Serafeim at Harvard Business School released a working paper called “The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance” discussing the connection between corporate sustainability and long-term financial performance. This paper compares so called “High Sustainability” and “Low Sustainability” companies based on their stock price and financial accounting metrics. Their classification was based on the adoption of environmental, social, and governance (ESG) policies in the 1990s that reinforced a cultural commitment to sustainability.

The authors found that the “High Sustainability” category significantly outperformed the “Low Sustainability” category in both stock price and financial accounting metrics. This means that companies adopting a system, process and culture of sustainability have the potential to generate higher profits and shareholder returns in the long run which eventually leads to a competitive advantage in the marketplace.

The full paper can be downloaded here >>

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