Much of our research is concerned with the “business case for sustainability”, i.e. how and when ecological and social sustainability can be aligned with economic interests. In a recent project, we investigated the status quo regarding this question in the academic literature. Scholars and investors have published more than 2000 empirical studies and several review studies on the relationship between environmental, social and governance (ESG) criteria and corporate financial performance (CFP). This project extracted all provided primary and secondary data of the previous academic review studies.
The results show that the business case for ESG investing is empirically very well-founded. Roughly 90% of studies find a nonnegative ESG–CFP relation/ratio. More importantly, the large majority of studies report positive findings. Furthermore, we highlight that the positive ESG impact on CFP appears stable over time. Based on these research outcomes, we have come to an important conclusion for investors and financial markets as a whole: based on extant/existing literature, the business case for being a good firm is undeniable.
In order to further foster sustainable finance, we consider so-called impact investments as a key lever. In a nutshell, this type of investment puts the social and/or environmental impact first and considers financial performance afterwards. In other words, the impact on the real world is at the heart of this investment style/strategy. In this context, the recently published T100 report of tonic comes to remarkable conclusions: 100% impact portfolios are presently achievable; they can be constructed in any geography, including both developing and developed countries and communities. Furthermore, 100% impact portfolios can be constructed across all asset classes. These findings motivate us to better understand the market for impact investments. Thus, our research investigates corresponding investor behavior and expectations and at the same time lays out the foundations for impact assessments