Investors are pouring money into – and earning solid returns on — companies with strong records on environmental sustainability, social responsibility and good governance, writes Laura D. Tyson in a new column for Project Syndicate.
Citing new data on both investment and corporate performance, Tyson argues that investors and corporate executives increasingly recognize the business case for sustainability and social responsibility.
*In 2014, One out of every six dollars in assets under assets under professional management in the United States – a total of $6.6 trillion – was allocated toward some form of sustainable investment.
*Some 1,260 companies, managing $45 trillion worth of assets, are signatories of the United Nations’ “principles for responsible investment,” which recognize environmental, social, and governance (ESG) factors as critical to investors. CalPERS, one of the world’s largest institutional investors, has gone even further and will require all of its investment managers to identify and integrate ESG into their decisions.
Challenging a common misperception, Tyson points to a growing body of studies which find that companies that invest in sustainability and social responsibility also tend to produce strong financial returns.
“A seminal 2012 study that analyzed two groups of companies – similar in terms of industry, size, financial performance, and growth prospects – found that those in the “high sustainability group” had superior share-price performance,” she writes. A new study by Morgan Stanley’s Institute for Sustainable Investing, which analyzed the performance of 10,228 open-ended mutual funds and 2,874 separately managed accounts, found that sustainable investments usually met – and often exceeded – the median returns of comparable traditional investments.
Tyson bolsters the evidence from aggregate studies with examples from major US corporations such as Google, DuPont and Procter and Gamble.
“There are good reasons to believe that, by investing in improving material sustainability, companies can increase shareholder value,” she concludes. “In fact, if a company is to fulfill its fiduciary responsibility to its investors, it has little choice but to go beyond financial returns to incorporate ESG factors that are likely to have a material impact on its performance over time.”
Read the full column here: http://www.project-syndicate.org/commentary/business-case-for-sustainability-by-laura-tyson-2015-06