From the Stockholder to the Stakeholder: How Sustainability Can Drive Financial Outperformance

Abstract

In this enhanced meta-study we categorize more than 200 different sources. Within it, we find a remarkable correlation between diligent sustainability business practices and economic performance. The first part of the report explores this thesis from a strategic management perspective, with remarkable results: 88% of reviewed sources find that companies with robust sustainability practices demonstrate better operational performance, which ultimately translates into cashflows. The second part of the report builds on this, where 80% of the reviewed studies demonstrate that prudent sustainability practices have a positive influence on investment performance. This report ultimately demonstrates that responsibility and profitability are not incompatible, but in fact wholly complementary. When investors and asset owners replace the question “how much return?” with “how much sustainable return?”, then they have evolved from a stockholder to a stakeholder.

Note: 'From the Stockholder to the Stakeholder' was co-authored by the Smith School of Enterprise and the Environment at the University of Oxford and Arabesque Asset Management. Funding was provided by Arabesque Asset Management.

Keywords: Sustainability, Corporate Social Responsibility, ESG, financial performance, cost of capital

JEL Classification: G23, G30, M14