Photo: Photopress-Archiv/Keystone
of the company. Management can get a handle on metrics concerning energy and resource efficiency, human resource management, stakeholder relations and product innovation in emerging markets, where regulatory regimes may be weaker. This information can help management and company meet international standards. The very fact that a company is systematically tracking its sustainability performance is often taken as a first proxy indicator for an appraisal of the quality of a company’s governance and management. Sustainability reporting is still a relatively new practice. The GRI’s G3 Guidelines for Sustainability Reporting are updated regularly to integrate advances in the accumulated experience among practitioners. However, this evolution needs to be extended and a key challenge for business directors and investors is to find reliable ways of assessing the effects of sustainability performance on the company’s accounts and its stock price or market value. Our evolving collective understanding of sustainability risks combined with the volatility of market dynamics make the correlation of sustainability performance and market price a complex issue. However, some interesting research is emerging. Most important is the longer-term research into the correlation between a company’s sustainability performance and its stock price. One example is the recently published research by Robeco and SAM Group, research provider to the Dow Jones Sustainability Index, who looked at seven years’ worth of data on companies’ sustainability performance. SAM Group found that picking the star sustainability performers and selling the worst performers would have been a reasonable investment strategy over this period as the top 20 percent outperformed the universe while the bottom 20 percent clearly
underperformed. While no conclusions can be drawn about any cause-effect relationship, their findings are consistent with other research in this area. Research in the nature of the relationship between sustainability performance and a company’s market value, will continue as the pool of data widens, and the first to articulate a reliable method for valuing this link could well be in line to win the next Nobel Prize for Economics.
Information: Swiss weekly newsreel 1940.
Gazing into the crystal ball
Forecasting in today’s volatile market can be risky business. Few people predicted the recent financial crisis. Commentators in the general and business press now excel in hindsight wisdom. Apparently, the market’s shortcomings and risks had actually been known yet not articulated while we were enjoying the benefits of market growth. Few dared or managed to raise an audible voice before the current financial crisis unfolded. Will the same happen when the consequences of climate change, peak oil, water scarcity, population growth, and widespread poverty hit home? When their impacts are no Responsible Wealth Review – Vol. 2
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