The Financial and Social Benefits of ESG Integration: Focus on Materiality

The Financial and Social Benefits of ESG Integration: Focus on Materiality l Calvert Investments

Calvert-Serafeim series

HIGHLIGHTS

  • Material environmental, social and governance (ESG) issues impact a company's financials in terms of revenues, costs, and the cost of capital.
  • Because ESG data is slow to be incorporated into stock prices, investors who accurately understand ESG implications typically have time to take advantage of opportunities and generate alpha.
  • A study from George Serafeim and colleagues at the Harvard Business School indicates that firms making investment in material ESG issues outperformed peers in terms of profit margin growth.
  • Firms making investments based on immaterial ESG issues demonstrated very similar performance to peers, suggesting that immaterial ESG investments are not, on average, value-relevant.