Does Sustainability Generate Better Financial Performance? Review, Meta-analysis, and Propositions

29 Pages Posted: 26 Oct 2020 Last revised: 9 Sep 2021

See all articles by Ulrich Atz

Ulrich Atz

New York University (NYU) - Center for Sustainable Business

Zongyuan Zoe Liu

John Hopkins University, School of Advanced International Studies

Christopher Bruno

The Wharton School, Management Department

Tracy Van Holt

Insight Network LLC

Date Written: August 31, 2021

Abstract

Sustainability in business and ESG (environmental, social, and governance) in finance have exploded in popularity among researchers and practitioners. We surveyed 1,141 primary peer- reviewed papers and 27 meta-reviews (based on ~1,400 underlying studies) published between 2015 and 2020. Aggregate conclusions from a sample suggest that the financial performance of ESG investing has on average been indistinguishable from conventional investing (with one in three studies indicating superior performance) – in contrast with research in the wider management literature as well as industry reports. Until recently top finance journals did not publish climate change related studies, yet these studies capture the frontier of corporate risk and ESG investment strategies. We developed three propositions: first, ESG integration as a strategy seems to perform better than screening or divestment; second, ESG investing provides asymmetric benefits, especially during a social or economic crisis; and third, decarbonization strategies can potentially capture a climate risk premium.

Keywords: sustainability, climate change, financial performance, ESG, meta-analysis, review

JEL Classification: A13, G23, G30, M14, M41

Suggested Citation

Atz, Ulrich and Liu, Zongyuan Zoe and Bruno, Christopher and Van Holt, Tracy, Does Sustainability Generate Better Financial Performance? Review, Meta-analysis, and Propositions (August 31, 2021). Available at SSRN: https://ssrn.com/abstract=3708495 or http://dx.doi.org/10.2139/ssrn.3708495

Ulrich Atz (Contact Author)

New York University (NYU) - Center for Sustainable Business ( email )

44 West 4th St.
New York, NY 10012
United States

Zongyuan Zoe Liu

John Hopkins University, School of Advanced International Studies ( email )

Christopher Bruno

The Wharton School, Management Department ( email )

The Wharton School
Philadelphia, PA 19104-6370
United States

Tracy Van Holt

Insight Network LLC ( email )

New York, NY New York 10001
United States

HOME PAGE: http://www.insightnet.co

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