Thursday, June 25, 2015
Sustainability, CSR, ESG & SRI = $
According to a 2015 Deutsche Bank study high CSR and ESG scores are correlated with higher performance. A summary report from DB Climate Change advisers titled Sustainable Investing: Establishing Long-Term Value and Performance, found that sustainable firms have a lower cost of capital and provide lower levels of risks to investors.
Deutsche Bank uses this report to recommend that ESG be built into every investment process and into corporate strategies.
In Europe there is data to indicate that sustainability regulation actually increases profits. According to CDP companies with published targets for cutting their CO2 emissions are more profitable than those without.
The growth of Euronext’s Low Carbon 100 Europe index also suggests that companies generate value from being environmentally aware. European firms with the lowest CO2 emissions in their respective industries have risen by 60 percent in the last five years.
"Companies that adapt quickest to the new environmental realities are the likeliest to thrive," said Kaveh Zahedi of the United Nations Environment Programme.
The idea that investing in sustainable companies contributes to better results is not new. In 2011 a number of surveys were already suggesting that CSR can improve profits, is possible.
In 2012 there were already a number of studies that suggested as much. Studies conducted by Sustainable Asset Management (SAM) reveal that companies with high sustainability scores outperformed their counterparts with low sustainability scores. This data indicates that there is a correlation between sustainability and financial performance including stock returns, during both the financial crisis and post-crisis periods.
Another 2012 study compared 180 companies and found that the more environmentally friendly businesses were more profitable in the long run than their less-sustainable competitors.
As reported in IT Times, a study by Eccles, Ionna, and Serafein, titled The Impact of a Corporate Culture of Sustainability on Corporate Behaviour and Performance, indicates that sustainable companies outperform a matched group of firms in the long run. Companies can maximise long-term value creation by integrating ESG factors into the company strategy, the measurement of outputs, and the assessment of risks and opportunities. Another study shows that the median return on green funds in 2012, was 28 percent.
A 2013 study by MIT Sloan Management showed that 37 percent of surveyed executives reporting a profit from their efforts, representing a 23 percent rise over the preceeding year. According to a 2013 Havas Media analysis, meaningful Brands outperformed the stock market by 120 percent
Another 2013 report shows that 60 percent of small businesses found sales of green products increased and outpaced traditional alternatives during the recession
In 2014 the EDF put forth some case studies showing how smaller environmental footprints are related to larger profits and better overall performance.
Posted by Richard Matthews