Sustainable investment and profitability can go hand in hand, according to a new report that found sustainable practices ‘positively influenced’ stock prices. The authors of the report predict that including sustainability factors will become the norm in investment processes in the coming years.

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The report – From the Stockholder to the Stakeholder – has been published by the Smith School of Enterprise and the Environment at the University of Oxford and Arabesque Asset Management. It looked at over 200 academic studies, industry reports and books assessing the effect of sustainability on financial performance.

The research found that 80% of the sources analysed shows that stock prices are positively influenced by good sustainability practices. Additionally, 90% of studies reveal that high environmental, social and governance (ESG) standards will lower the cost of capital for companies, with superior sustainability standards improving a corporations’ access to capital.

Andreas Feiner, from Arabesque Asset Management, said, “Based on the growing trend that we are seeing of sustainability entering the corporate mainstream, we believe that the most successful future investors will be those with continuous research programmes that analyse a range of ESG factors. Sustainability and profitability can go hand in hand.”

The authors of the report argue that it is in the best interest of investors and corporate managers to incorporate sustainability criteria into their decision-making process. They add that over the coming years they expect the inclusion of ESG parameters to become more commonplace, leafing to a drive from regulators to increase companies’ transparency in these areas.

University of Oxford’s professor Gordon Clark added, “The report very clearly demonstrates the economic relevance of sustainability for corporate management and for investors.

“The breadth of research analysed in our study brings us to the conclusion that ESG can and will add significant value for companies and their investors.”

Photo: Ken Tegardin via Freeimages

Further reading:

Research links sustainability initiatives to investment stability

Breaking the eight myths of sustainable and responsible investment

What leading investment houses say about sustainable investment

63% of UK investors want to be offered sustainable investment options

The Guide to Sustainable Investment 2014