NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, February 5, 2019

By Bill Hinchberger

When it emerged on the scene a decade ago, sustainable finance was widely regarded as little more than a boutique business for a relative handful of concerned investors. Today, it might be on the cusp of prime time. “They said that 2018 would be the year of socially responsible investing. Now they say 2019,” says Scott Sacknoff, CEO of SerenityShares, a Washington, D.C.-based investment firm.

Over 80% of corporations in the Standard & Poor’s 500 now publicly report their performance against environmental, social, and governance (ESG) standards, up from less than 20% a few years ago, reports the Governance & Accountability Institute. And 72%, according to PricewaterhouseCoopers, mention the Sustainable Development Goals (SDGs), a set of 17 aspirational targets for human development and sustainability—such as “no poverty,” “zero hunger,” and “responsible production and consumption”—that were adopted by the United Nations in 2015 as targets to be attained by 2030.

Companies that rank high according to sustainability criteria tend to boast stronger profit margins and higher share prices than their peers, several studies have found. This is generally true for over 300 of the world’s largest pharmaceutical, consumer goods, oil and gas, banking and tech companies, a 2017 Boston Consulting Group concluded. Sources interviewed for this article offered a laundry list of potential benefits: greater supply-chain efficiency, increased employee satisfaction and reduced labor risks, fewer regulatory fines, more rational use of natural resources, stakeholder (including consumer) engagement, better brand image, and improved productivity.

Photo courtesy of GotCredit.