MIT, BCG: Unlike what many company managers think, for investors, corporate sustainability performance and financial performance are strongly related: in fact, information on a company’s sustainability performance is regularly used in taking investment decisions

A study on corporate sustainability conducted by the MIT Sloan Management Review and The Boston Consulting Group (BCG) shows how investors today see sustainability performance and corporate performance as connected, taking strongly into account a company’s sustainability performance in making investment decisions.

A survey of more than 3,000 managers and investors from more than 100 countries showed that:

• Managers’ and investors’ perceptions on the importance of sustainability performance differ: the latter consider it far more important than managers do.
• Investors see sustainability as benefiting a company in more than one ways: improving the way it operates, reducing risks and costs.
• Investors today are ready to not invest in a company whose sustainability performance is judged as poor.
• There seems to be a significant lack of communication and an insufficient sharing of information both within – across the company hierarchy – and between firms, when it comes to corporate responsibility.
• A company’s inclusion in sustainability indices seems to not constitute an important factor for both company managers and investors as regards the evaluation of the company’s sustainability performance.
• Although companies consider it important, few have a sustainability strategy in place.

Some key facts:

• For 75% of investors, a company’s sustainability performance is a key factor in deciding to invest in the company.
• More than 50% of investors say their companies will not invest in businesses with a poor sustainability record.
• Research has shown that by managing successfully its sustainability issues, a company’s financial and operational performance is also improved – the company performs better than other companies in its sector –, putting the company in a growth path and decreasing the costs of capital.

According to the study, in order to attract investors interested in their sustainability performance, businesses should:

• Raise awareness about sustainability issues among both internal and external stakeholders.
• Identify and effectively deal with their material issues.
• Take actions on sustainability issues and focus on the results – results that should be real and measurable – of these actions.
• Plan and implement, in consultation with stakeholders, a sustainability strategy, making it an inextricable part of their wider corporate strategy.

References:

This article was compiled using published information by the MIT Sloan Management Review and The Boston Consulting Group (BCG) which is located at the link below. For the sake of readability, we did not use brackets or ellipses but made sure that the extra or missing words did not change the report’s meaning. If you would like to quote these written sources from the original please revert to the following link: 

http://sloanreview.mit.edu/projects/investing-for-a-sustainable-future/