Investors Reap Long-Term Rewards by Investing in High Sustainability Companies

A new study answers an elusive question – does investing in companies known for sustainable business practices result in better returns than investing in conventional companies? The study finds that yes, investing in sustainable corporations yields significantly better results both on stock and accounting performance. But like sustainability itself, those results are realized over a longer time frame. The outperformance is stronger for companies that sell directly to individuals rather than other companies – where they compete on the basis of brand reputation, and where products significantly depend upon extracting large amounts of natural resources. The key is how long the policies have been in place and how well they’ve permeated a company’s culture. Companies that long ago adopted environmental and social policies – "High Sustainability Companies" – exhibit fundamentally different characteristics than traditional firms that have never adopted these policies, conclude the researchers from Harvard and London Business Schools. High Sustainability Companies are much more likely to take a long-term view of their business. Their boards of directors are responsible for sustainability and they link top executive incentives with clear environmental and social metrics. Moreover, they are more likely to have organized procedures for engaging with stakeholders and to […]

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