While many companies have adopted sustainability practices in pursuit of environmental, social and governance values, an investment manager’s new research has indicated the measures are now essential and companies need to differentiate themselves from the pack to ensure better returns.
The study by Harvard Business School professor George Serafeim and Calvert Research and Management looked at 3,800 companies across 65 industries from 2012 to 2017.
The research, “When sustainable practices yield sustainable profits: The path to a strategic edge,” found that while sustainability practices have converged across companies within most industries, differentiated sustainability practices were associated with higher return on capital.
The data signalled companies are adopting an increasingly similar set of sustainability practices, implying they are more likely to be “survival necessities” than strategic differentiators.
Daniel Rourke, vice president and ESG senior research analyst along with Anne Matusewicz, responsible investments product manager at Calvert believe investors and managers should be aware of the distinction between strategic and common sustainability practices.
“Aligning with the findings of the Serafeim study, Calvert believes companies that distinguish themselves through their behavior and operations may outperform over the long term,” they said.
Other work by Professor Serafeim includes a paper on ESG data published in July, which criticised a general lack of transparency and consistency in metrics.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].