Investors reward companies for environmental results, not just targets. A study of 174 energy companies found those with lower carbon emissions received higher valuations from investors, as measured by Tobin's q, even though they did not see higher profits. Companies focusing only on setting emissions targets without achieving reductions did not see higher returns and demand. The key takeaways are that companies should focus on material environmental issues and attaining real improvements, like lower emissions, to increase investor satisfaction and demand for their stock. Process-based activities alone like target-setting are not enough to satisfy investors.
Political risk, ESG and market performance - March 2014Damian Karmelich
As the ASX releases new corporate governance guidelines with an increased focus on risk management and environmental, social and governance principles Political Monitor examines the link between ESG, political risk & market performance.
This Research Spotlight provides a summary of the academic literature on environmental, social, and governance (ESG) activities including:
• The relation between ESG activities and firm value
• The impact of environmental and social engagements on firm performance
• The market reaction to ESG events
• The relation between ESG and agency problems
• The performance of socially responsible investment (SRI) funds
This Research Spotlight expands upon issues introduced in the Quick Guide “Investors and Activism”.
What is socially responsible investment?dean771100
Socially Responsible Investments
Socially responsible investing is one of several similar approaches and concepts that impact how asset managers invest, in a socially responsible way. SRI's have been around for over 30 years in one form or another, and take the desire to make money and use it to create a better world. Companies which generate positive, measurable social and environmental change alongside a financial return. Keep in mind that it is a developing niche and therefore not without hiccups.
Challenges of the green imperative....a natural resource-based approach towar...Farhan Ahmad
presentation of an article "Challenges of the green imperative....a natural resource-based approach toward environmental orientation-business performance relationship." by bulent and lucie.
International Journal of Business and Management Invention (IJBMI)inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
New esg disclosure burden for midsize small cap companiesdean771100
New ESG Disclosure Burden for Midsize Small-Cap Companies
Capital markets have grown increasingly complex and globalized over the years, leading to increased complexity of risk management. This has led to a growing need for enhanced disclosure by companies in order to provide investors with information that enables them to understand risks related, among other things, to environmental, social and governance factors (ESG). These new ESG disclosure obligations will carry additional burden for midsize and small-cap businesses that may lack the required resources to adequately address all of these concerns. The new ESG disclosure obligations are primarily designed to help investors better understand risks related to environmental, social and governance factors. Midsize and small-cap firms usually have a more limited budget for disclosures as compared with larger companies which can devote more resources towards this area. The new regulations could impose substantial burdens on smaller firms.
Political risk, ESG and market performance - March 2014Damian Karmelich
As the ASX releases new corporate governance guidelines with an increased focus on risk management and environmental, social and governance principles Political Monitor examines the link between ESG, political risk & market performance.
This Research Spotlight provides a summary of the academic literature on environmental, social, and governance (ESG) activities including:
• The relation between ESG activities and firm value
• The impact of environmental and social engagements on firm performance
• The market reaction to ESG events
• The relation between ESG and agency problems
• The performance of socially responsible investment (SRI) funds
This Research Spotlight expands upon issues introduced in the Quick Guide “Investors and Activism”.
What is socially responsible investment?dean771100
Socially Responsible Investments
Socially responsible investing is one of several similar approaches and concepts that impact how asset managers invest, in a socially responsible way. SRI's have been around for over 30 years in one form or another, and take the desire to make money and use it to create a better world. Companies which generate positive, measurable social and environmental change alongside a financial return. Keep in mind that it is a developing niche and therefore not without hiccups.
Challenges of the green imperative....a natural resource-based approach towar...Farhan Ahmad
presentation of an article "Challenges of the green imperative....a natural resource-based approach toward environmental orientation-business performance relationship." by bulent and lucie.
International Journal of Business and Management Invention (IJBMI)inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
New esg disclosure burden for midsize small cap companiesdean771100
New ESG Disclosure Burden for Midsize Small-Cap Companies
Capital markets have grown increasingly complex and globalized over the years, leading to increased complexity of risk management. This has led to a growing need for enhanced disclosure by companies in order to provide investors with information that enables them to understand risks related, among other things, to environmental, social and governance factors (ESG). These new ESG disclosure obligations will carry additional burden for midsize and small-cap businesses that may lack the required resources to adequately address all of these concerns. The new ESG disclosure obligations are primarily designed to help investors better understand risks related to environmental, social and governance factors. Midsize and small-cap firms usually have a more limited budget for disclosures as compared with larger companies which can devote more resources towards this area. The new regulations could impose substantial burdens on smaller firms.
SB'12 Sketch Blog by Lorne Craig
A global revolution is in full swing, and the Sustainable Brands Conference is where sustainability, brand and innovation leaders gather to learn, share and strategize to shape the future. SB '12 was the largest gathering to date, a kinetic convergence of innovators from more than 150 companies from around the world finding new ways to create monumental disruption in traditional models of commerce and consumption.
Driving Performance and Transparency in Green Building Products and Materials...Sustainable Brands
is UL white paper provides an overview of the various ways in which building product manufacturers can demonstrate compliance with green building certification programs and codes, such as LEED, International Green Construction Code (IgCC), California’s Green Building Standards Code, Green Globes, and the Living Building Challenge. The paper also discusses the various tools intended to aid in the evaluation and selection of environmentally preferable products, such as environmental product certifications, Lifecycle Assessments (LCAs) and Environmental Product Declarations (EPDs), as well as the specific functions of each. The white paper concludes with some thoughts about the value of both performance and transparency metrics in achieving environmental leadership.
The leading brands of the future will be sustainable brands --
building them takes a new kind of thinking, with a new group
of collaborators and a new set of tools -- and the world-wide
Sustainable Brands community is showing the way.
In November, join sustainable brand innovators from unilever,
BASF, mArS, Adidas, Coca-Cola, kingfisher, Philips, uPS,
Sainsbury’s and more, at SB London -- the first meet up for the
Sustainable Brands community outside North America. expect
two days of extraordinary conversation, inspiration and insights
while we explore global market trends, breakthrough research and
disruptive new practices in brand strategy, communication, and
design driven by those who are seeing social and environmental
sustainability as a key driver of innovation in the 21st century.
By Brandon Boze, Margarita Krivitski, David F. Larcker, Brian Tayan, and Eva Zlotnicka
Stanford Closer Look Series
May 23, 2019
Recently, there has been debate among corporate managers, board of directors, and institutional investors around how best to incorporate ESG (environmental, social, and governance) factors into strategic and investment decision-making processes. In this Closer Look, we examine a framework informed by the experience of ValueAct Capital and include case examples.
We ask:
• What is the investment horizon prevalent among most companies today?
• Do companies miss long-term opportunities because of a focus on short-term costs?
• How many companies have an opportunity to profitably invest in ESG solutions?
• What factors determine whether a company can profitably invest in ESG solutions?
• Can investors earn competitive risk-adjusted returns through ESG investments?
• If so, how widespread is this opportunity?
The increasing awareness of stakeholders is leading firms to adopt strategies related to the reduction of their environmental impact, not necessarily linked to existing regulatory provisions (e.g. Corporate Social Responsibility strategies). We focus on the potential role of banks, when dealing with the credit merit of potential investors, and move a first step in the direction of understanding the consequences and trade-offs involved in the adoption of “green credit merit” (GCM) measurement tools. After providing a theoretical background for our investigation, we develop a descriptive analysis using firm level Spanish data. We show that in certain cases projects featuring a low environmental impact would gain access to credit according to green credit merit procedures but not according to standard credit merit indicators. Also, and remarkably, indicators focused on specific environmental problems (e.g. related to energy consumption) might prove much more effective and informative than wider ones.
Sustainability corporate social responsibility (ss)Trevor Shelton
ECOFLO's Sustainabiltiy Committee presents "Corporate Environmental Responsibility". The first session exploring the three pillars of sustainability (Planet, People, and Profits) and our internal and external expectations to be stewards of the environment.
Strategies on how companies can be green and competitive. This is an old school project but I thought this information would be useful to share. All images are from the Internet and belong to their respective owners.
Investing with Purpose: Navigating the Intersection of Finance and Social Res...Champak Jhagmag
A new way of thinking is emerging, linking financial success with societal welfare. This is seen in the growth of sustainable investing, where investors are looking beyond just profits to consider the wider impact of their investments on the environment, society, and governance (ESG). By adopting social responsibility principles, investors can not only increase their wealth but also help create positive changes in society and the environment.
The MSLGROUP paper on "Value and Values: A Winning Business Strategy" discusses the benefits of economic stewardship and ways to develop an environmentally sustainable approach to business.
SB'12 Sketch Blog by Lorne Craig
A global revolution is in full swing, and the Sustainable Brands Conference is where sustainability, brand and innovation leaders gather to learn, share and strategize to shape the future. SB '12 was the largest gathering to date, a kinetic convergence of innovators from more than 150 companies from around the world finding new ways to create monumental disruption in traditional models of commerce and consumption.
Driving Performance and Transparency in Green Building Products and Materials...Sustainable Brands
is UL white paper provides an overview of the various ways in which building product manufacturers can demonstrate compliance with green building certification programs and codes, such as LEED, International Green Construction Code (IgCC), California’s Green Building Standards Code, Green Globes, and the Living Building Challenge. The paper also discusses the various tools intended to aid in the evaluation and selection of environmentally preferable products, such as environmental product certifications, Lifecycle Assessments (LCAs) and Environmental Product Declarations (EPDs), as well as the specific functions of each. The white paper concludes with some thoughts about the value of both performance and transparency metrics in achieving environmental leadership.
The leading brands of the future will be sustainable brands --
building them takes a new kind of thinking, with a new group
of collaborators and a new set of tools -- and the world-wide
Sustainable Brands community is showing the way.
In November, join sustainable brand innovators from unilever,
BASF, mArS, Adidas, Coca-Cola, kingfisher, Philips, uPS,
Sainsbury’s and more, at SB London -- the first meet up for the
Sustainable Brands community outside North America. expect
two days of extraordinary conversation, inspiration and insights
while we explore global market trends, breakthrough research and
disruptive new practices in brand strategy, communication, and
design driven by those who are seeing social and environmental
sustainability as a key driver of innovation in the 21st century.
By Brandon Boze, Margarita Krivitski, David F. Larcker, Brian Tayan, and Eva Zlotnicka
Stanford Closer Look Series
May 23, 2019
Recently, there has been debate among corporate managers, board of directors, and institutional investors around how best to incorporate ESG (environmental, social, and governance) factors into strategic and investment decision-making processes. In this Closer Look, we examine a framework informed by the experience of ValueAct Capital and include case examples.
We ask:
• What is the investment horizon prevalent among most companies today?
• Do companies miss long-term opportunities because of a focus on short-term costs?
• How many companies have an opportunity to profitably invest in ESG solutions?
• What factors determine whether a company can profitably invest in ESG solutions?
• Can investors earn competitive risk-adjusted returns through ESG investments?
• If so, how widespread is this opportunity?
The increasing awareness of stakeholders is leading firms to adopt strategies related to the reduction of their environmental impact, not necessarily linked to existing regulatory provisions (e.g. Corporate Social Responsibility strategies). We focus on the potential role of banks, when dealing with the credit merit of potential investors, and move a first step in the direction of understanding the consequences and trade-offs involved in the adoption of “green credit merit” (GCM) measurement tools. After providing a theoretical background for our investigation, we develop a descriptive analysis using firm level Spanish data. We show that in certain cases projects featuring a low environmental impact would gain access to credit according to green credit merit procedures but not according to standard credit merit indicators. Also, and remarkably, indicators focused on specific environmental problems (e.g. related to energy consumption) might prove much more effective and informative than wider ones.
Sustainability corporate social responsibility (ss)Trevor Shelton
ECOFLO's Sustainabiltiy Committee presents "Corporate Environmental Responsibility". The first session exploring the three pillars of sustainability (Planet, People, and Profits) and our internal and external expectations to be stewards of the environment.
Strategies on how companies can be green and competitive. This is an old school project but I thought this information would be useful to share. All images are from the Internet and belong to their respective owners.
Investing with Purpose: Navigating the Intersection of Finance and Social Res...Champak Jhagmag
A new way of thinking is emerging, linking financial success with societal welfare. This is seen in the growth of sustainable investing, where investors are looking beyond just profits to consider the wider impact of their investments on the environment, society, and governance (ESG). By adopting social responsibility principles, investors can not only increase their wealth but also help create positive changes in society and the environment.
The MSLGROUP paper on "Value and Values: A Winning Business Strategy" discusses the benefits of economic stewardship and ways to develop an environmentally sustainable approach to business.
The business case for environmental sustainability: embedding long-term strat...Ken Dooley
ABSTRACT Current environmental demands, such as the need to meet governmental climate change adaptation targets or to avoid future resource scarcities have created a business opportunity for firms that eschew business as usual and adopt ambitious environmentally focused systemic innovations. This article aims to present a clear business case for corporate environmental sustainability in order to increase investments in this area. The core focus is on the tangible economic benefits that can be realised through environmental strategies such as risk reduction and efficiency gains. The aim is to show that sustainability can be an opportunity rather than an obligation and that not only can environmental and economic performance be optimised simultaneously but that economic performance can be optimised through environmental strategies. It is expected that this approach shall increase competitive advantage while supporting climate change mitigation. The article also highlights the current drivers that provide motivation for environmental performance improvement such as global trends towards resource efficiency and the exposure to long term environmental risks. Sustainability is a multidimensional subject that involves a diverse range of operational processes and it is argued that a greater portion of sustainability resources should be invested in ambitious environmentally focused systemic innovations. This will enable sustainability to be strategically integrated into the core business practices. Embedded sustainability is the term used to describe a high level of sustainability integration.
Putting “Impact” at the Center of Impact Investing: A Case Study of How Green...The Rockefeller Foundation
More than ever before, investors are looking to put their money where their values are. As a result, impact investing has burgeoned into an over $100 billion industry in just over ten years. But how do impact investors know whether their money is truly having a positive impact on people and
the planet? How can these investors better manage their results, and use material data – both positive and negative – about social and environmental performance to maximize their impact?
This case study documents the journey of one organization, Green Canopy Homes – and its financing arm, Green Canopy Capital – toward more systematically thinking about, measuring, and managing its impact. While developing the impact thesis for its resource-efficient homes, Green Canopy applied a theory of change tool, an approach common within the social sector, to systematically map the causal pathways between its strategies and intended impact. Its rationale for adopting this approach was simple: use it to maximize impact, and understand and minimize possible harm. The tool also effectively positioned Green Canopy to measure and communicate about its social and environmental performance, and to make client-centric adaptations to its business.
The case study provides an illuminating example of how investors can adapt theory of change to serve their impact management needs. By demonstrating the relevance and transferability of this tool for articulating, measuring, and managing impact, the hope is that this case study can contribute to strengthening other investors’ approaches, in turn contributing to building the evidence base for the “impact” of impact investments.
Similar to Ri investors reward_environmental_results (20)
Building Brand Value through Upcycling: How Creativity, Marketing and Social ...
Ri investors reward_environmental_results
1. research insights
Investors Reward Environmental Results –
Not Targets
Companies that show real results in environmental used or emissions generated. Process-based
performance – such as lower carbon emissions – environmental performance describes the firm’s
receive a premium from investors. internal efforts to anticipate, manage or respond to
environmental concerns, such as setting targets or
For decades, researchers have tried to answer announcing an environmental strategy.
the question “Does it pay for companies to be
green?” and the studies have provided conflicting
results. Some studies show strong environmental
“... lowering carbon
performance leads to strong financial emissions did not directly
performance; other studies, however, suggest
environmental performance has no effect – or affect a company’s value
sometimes even a negative effect – on financial
performance. on paper, but it did affect
Timo Busch and Volker Hoffman of Swiss
how much investors
university ETH Zurich were intrigued by these
conflicting results. The researchers conducted
were willing to pay for the
a nuanced study of the relationship between company’s stock.”
environmental and financial performance,
examining 174 energy-intensive companies with
large market capitalization in the Dow Jones Investors Pay for Environmental Results
Global Index. When the researchers measured return on
equity (shareholder return) and return on assets
Materiality Matters (how efficiently the assets produce income) they
First, the researchers distinguished between found no correlation between a firm’s financial
two kinds of environmental issues that matter to performance and environmental performance.
investors: issues that have a material effect on the They did find, however, that firms with lower
company (such as air pollution in regions where carbon emissions had higher Tobin’s q than their
pollution is taxed) and issues that do not have a more carbon-intensive peers. Tobin’s q is a ratio
material effect (such as assessing eco-efficiency, that captures the difference between a public
without actively managing it). In particular, they company’s market and book values. In other
focused on carbon emissions as a material issue words, lowering carbon emissions did not directly
to study. affect a company’s value on paper, but it did affect
how much investors were willing to pay for the
Results versus Targets company’s stock.
Next, the researchers defined environmental
performance two ways: one way based on The researchers theorize that, as companies
outcomes, or results, and the other based on improve their operational efficiency and satisfy
process. Outcome-based performance refers to concerns about environmental impact, investor
reductions in energy consumed, raw materials satisfaction increases. In the current business
2. research insights
climate, investors are anxious to see companies The Takeaway
reduce the likelihood of environmental risks If you want your environmental efforts to positively
and sanctions and increase their attractiveness affect your company’s financial standing:
to environmentally conscious consumers and
investors. When a firm satisfies these concerns 1. Choose an environmental issue that has a
its perceived value increases and demand for its material effect on your business;
stock goes up. 2. Focus on attaining real improvements in the
chosen area (e.g. reduce carbon emissions).
“... not only did activities When you do these two things, investor
such as setting emissions satisfaction increases. Your company’s “intangible
value” increases as investors award you with an
targets fail to generate environmental premium, and demand increases for
opportunity to invest in your company.
good returns for investors
– they also failed to drive The researchers do not suggest, however, that
companies abandon process-based activities
investor demand.” such as target-setting and environmental planning:
these activities are crucial to achieving the real
results investors value. Their findings just reveal
The study found companies with process- that a splashy public announcement about your
based outcomes such as emissions targets had plans to become carbon neutral, for example,
significantly lower return on equity and Tobin’s won’t send investors flocking to buy your stock.
q. In other words, not only did activities such as The researchers note that, as environmental issues
setting emissions targets fail to generate good become more acute, this may change and, in the
returns for investors – they also failed to drive future, investors may start awarding premiums for
investor demand. This is likely because process- both environmental results and targets.
based activities often add immediate costs
without providing evidence for shareholders that
costs will eventually decrease and environmental
results will improve. This result is in keeping with
standard economic theory that stresses cost
minimization as a key to financial performance.
The researchers conclude that investors evaluate
different forms of environmental performance in
different ways. When firms focus on improving
actual outcomes, investors respond by awarding
the firm with a “premium” in the form of increased
demand. When firms focus on process where
the actual outcomes remain uncertain—the
anticipation and management of environmental
issues—investors do not reward them.
Source: Busch, T. and Hoffmann V. “How Hot is Your Bottom Line? Linking Carbon and Financial Performance.” September 2012
Business & Society 50(2) 233-265.
Summary: Lisa Richmond and the NBS team