- Recent research confirms that sustainable investment is more profitable for investors.
- History has shown that companies with a good ESG rating pay higher dividends, for example.
- Sustainably managed companies generally have a lower risk exposure.
34 %
is the rate by which the global volume of sustainably managed assets has grown since 2016.
Cases such as the Deepwater Horizon have led investors to reassess the hazards by using ESG criteria to evaluate the risks. The acronym ESG stands for Environment, Social and Governance.[1] The key focus was thereby on the risk of potential losses. The American index provider MSCI has taken this a step further and asked: What are the direct financial benefits of sustainable investment for investors?[2] The MSCI study compared the development of several market indicators over the past decade: The key conclusions:
Companies with a good ESG rating generally have a lower risk exposure. [3] One reason for this lower risk may be that these companies employ more stringent risk monitoring methods. [4] This was obviously not the case with the Deepwater Horizon. MSCI consequently omitted BP from its sustainability index in early 2010 – shortly before the catastrophe on the drilling rig. [5]
Having a good sustainability rating results in greater profitability and higher dividends. To give an example: The ESG-dominated emerging market index MSCI EM ESG Leaders grew by 179.52 percent from 2007 to 2019, whereas the traditional MSCI EM grew by 118.93 percent.[6] Why? Because, among other things, companies that follow a sustainable strategy are more future-oriented, attract a more talented workforce and maintain a stronger culture of innovation. [7]
Improving the ESG rating significantly enhances the performance, As shown by another MSCI survey.[4] The index provider compared factors such as the long-term performance of companies that had improved their ESG rating with the performance of companies whose ESG rating had deteriorated. The result: In an analysis of industrialized nations over a timespan of nine years, companies in the first group grew by 12 points more than those in the second group. .[8]
