Title :
ESG AND FINANCIAL PERFORMANCE: Uncovering the Relationship by Aggregating Evidence from 1,000 Plus Studies Published between 2015 – 2020
Executive Summary
Meta-studies examining the relationship between ESG and financial performance have a decades-long history. Almost all the articles they cover, however, were written before 2015. Those analyses found positive correlations between ESG performance and operational efficiencies, stock performance and lower cost of capital. Five years later, we have seen an exponential growth in ESG and impact investing – due in large part to increasing evidence that business strategy focused on material ESG issues is synonymous with high quality management teams and improved returns. A case in point: A recent study looked at the initial stock market reaction to the COVID-19 crisis (up to March 23) and found that companies scoring high on a “crisis response” measure (based on Human Capital, Supply Chain, and Products and Services ESG sentiment) were associated with 1.4-2.7% higher stock returns (Cheema-Fox et al., 2020). Nevertheless, the topic continues to
be debated, with some arguing that companies and investors should stick to managing for stock price and that ESG is, at best, a distraction from the real business of making money.
Authors
Tensie Whelan, Ulrich Atz, Tracy Van Holt and Casey Clark, CFA
Link .