Differentiated sustainability practices see higher ROC

calvert-research/ESG/Eaton-Vance/

9 October 2019
| By Oksana Patron |
image
image
expand image

Differentiated sustainability practices, which were least susceptible to convergence, were associated with higher returns on capital (ROC) and conveyed strategic competitive advantages, according to the research conducted by Harvard Business School in collaboration with Eaton Vance’s affiliate, Calvert Research and Management.

The report "When sustainable practices yield sustainable profits: The path to a strategic edge” found that generally companies appeared to be adopting increasingly similar set of sustainability practices which meant that the common practices were not the strategic differentiators.

Following this, the persistent leaders who remained ahead of the industry average managed to gain the most in terms of increased ROC.

According to the study’s results, which looked at the 3,800 companies across 65 industries from 2012 to 2017, the ability to understand which practices were becoming common and which were differentiated could provide important insights into corporate strategy and help build a strategic advantage.

Therefore the distinction between strategic and common sustainability practices was key for managers, investors and stakeholders.

Daniel Rourke, vice president and ESG senior research analyst, and Anne B. Matusewicz, responsible investment strategy at Calvert Research and Management, said in a press release that Calvert believed companies that distinguish themselves through their behaviour and operations may outperform over the long term.

“Our research process allows Calvert ESG analysts to rate and rank issuers relative to their peer groups so that we can differentiate between sustainability leaders and average performers (or common practices),” they said.

“This helps generate a more holistic view — one that encompasses how companies affect, and are affected by, social and environmental factors, and the resulting impact on financial performance.

“Through a robust research system maintained by sector specialists and monitored by the broader ESG team, Calvert analysts are able to take data from an array of sources and rate and rank issuers in accordance with what we consider best practices at the sub-industry level.”

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

So we are now underwriting criminal scams?...

2 months 3 weeks ago

Glad to see the back of you Steve. You made financial more expensive, not more affordable as you claim, and presided ...

2 months 3 weeks ago

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

4 months 3 weeks ago

ASIC has suspended the Australian Financial Services Licence of a Melbourne-based financial advice firm....

1 week 3 days ago

The corporate regulator has issued infringement notices to three AFSLs whose financial advisers provided personal advice to a retail client while unregistered....

2 weeks 2 days ago

ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test....

3 weeks ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND