Transcription of ESG AND FINANCIAL PERFORMANCE - New York University
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ESG AND FINANCIAL PERFORMANCE - New York University
ESG AND FINANCIAL PERFORMANCE : Uncovering the Relationship by Aggregating Evidence from 1,000 Plus Studies Published between 2015 2020By Tensie Whelan, Ulrich Atz, Tracy Van Holt and Casey Clark, CFA2 ESG and FINANCIAL PerformanceMeta-studies examining the relationship between ESG and FINANCIAL PERFORMANCE have a decades-long history. Almost all the articles they cover, however, were written before 2015. Those analyses found positive correlations between ESG PERFORMANCE and operational efficiencies, stock PERFORMANCE and lower cost of capital. Five years later, we have seen an exponential growth in ESG and impact investing due in large part to increasing evidence that business strategy focused on material ESG issues is synonymous with high quality management teams and improved returns. A case in point: A recent study looked at the initial stock market reaction to the COVID-19 crisis (up to March 23) and found that companies scoring high on a crisis response measure (based on Human Capital, Supply Chain, and Products and Services ESG sentiment) were associated with higher stock returns (Cheema-Fox et al.)
ESG issues, ESG data shortcomings, and confusion regarding different ESG investing strategies. • Research covering ESG and financial performance often suffers from inconsistent terminology and nomenclature. Meuer et al. (2019) found 33 definitions of corporate sustainability in usage. For corporations, embedded sustainability (ESG is part of the
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