Friday, 1 March 2013

Being green pays!

Corporations often see being green as ‘soft and fluffy’; a cost not a benefit....
For four years now I have been analysing corporate governance with master’s students of Edinburgh University Business School and others universities around the world, including from the US and the Netherlands, for a US consultancy. The reports remain the property of the universities but a summary will be out soon and it makes interesting reading for us at green24.

It is only one element, and I’d be the first to be cautious about any set of data, but one side line of the survey – which looks at everything from compliance with governance codes to senior pay and board behaviour – is worth noting here if it is only in the small print elsewhere.

That is that by measuring data from the public reports and accounts from the FTSE 100 and Eurostoxx 50 Indices we have found a reasonable correlation or statistical relationship between the sustainability parts of the index – environmental responsibility, emissions data, community investment and such – and long term financial performance.

In brief, it appears that being green pays!

It should be noted that the financial return is seen in long-term return on assets, and not immediate profitability, but that is what you might intuitively expect and that is what shareholders often really want to see. We need to do more research in 2013 and extend our reach into Asia, as we are now doing, but it is a glimmer of an important argument that will help put to bed the old ‘business case’ requirement that is often used as a defence.

Correlation is not causation but it gives us a start!

David Jackman

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