Using newly available materiality classifications of sustainability topics, we develop a novel dataset by hand-mapping sustainability investments classified as material for each industry into firm-specific sustainability ratings. This allows us to present new evidence on the value implications of sustainability investments. Using both calendar-time portfolio stock return regressions and firm-level panel regressions, we find that firms with good ratings on material sustainability issues significantly outperform firms with poor ratings on these issues. In contrast, firms with good ratings on immaterial sustainability issues do not significantly outperform firms with poor ratings on the same issues. These results are confirmed when we analyze future changes in accounting performance. The results have implications for asset managers who have committed to the integration of sustainability factors in their capital allocation decisions.
Bibliographical noteFunding Information:
We are grateful for comments from seminar participants at National University of Singapore, the 2015 Annual Conference of the Alliance for Research on Corporate Sustainability, Harvard Business School, Oxford University, and from staff members of the Sustainability Accounting Standards Board (SASB). We are grateful for financial support from the Division of Faculty Research and Development at Harvard Business School. George Serafeim has served on the Standards Council of SASB. The views expressed in this paper are those of the author and do not reflect an official position of the SASB.
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- Corporate social responsibility
- Investment performance