Groundbreaking research conducted by the League of Scholars has unveiled a compelling financial advantage for companies adopting sustainable business practices. The study focussed on member companies of the United Nations Global Compact Network Australia (UNGCNA) revealing a 5% annual premium (4.93%) on returns compared to non-members. This signifies a significant financial edge for businesses committed to sustainability.
Led by Professor Paul X McCarthy, CEO and Co-Founder of the League of Scholars, the research compared shareholder returns from 60 ASX-listed UNGCNA member companies against a matched group of companies, taking into account industry and size.
Key findings:
- A portfolio of sixty ASX-Listed UN Global Compact member companies experienced an 18% growth in enterprise value from 2021 to 2024, in contrast to a mere 3% growth for a portfolio of sixty comparable non-member companies of the same industry and size.
- The average annual difference between share market returns for member companies compared with equivalent non-member companies is an impressive 4.93%.
Estelle Parker, CEO of the Responsible Investment Association Australasia (RIAA), expressed her lack of surprise at the superior returns demonstrated by companies dedicated to sustainability objectives.
Parker stated, “Investors have known this for some time – expectations of longer-term returns are a key driver of the growth of the responsible investment market. Consideration of ESG risk has become a health check as investors decide which companies to invest in, and they want their companies to do well on issues like climate, human rights, and nature protection. They’re engaging on a grand scale with investee companies to make sure they get it right. It’s clear that companies neglecting sustainability issues risk lagging behind,” Parker said.
Louise Davidson AM CEO Australian Council of Superannuation Investors (ACSI) said, “Investors have long been clear that issues such as climate change, modern slavery, diversity, and good governance are financially material issues. We welcome this research that demonstrates the premium that companies can achieve through good management of their environmental, social, and governance performance.”
In support of the research, Kate Dundas, Executive Director at UNGCNA said, “We know that businesses that invest in positive change perform better, and it is encouraging to this clearly reflected in this research. With the impacts of economic downturn being felt across the country it is important that research like this can point to the business benefits as well as social and environmental benefits of investing in sustainable business practices.
About UN Global Compact Network Australia
The UN Global Compact Network Australia (UNGCNA) is the Australian local network of the world’s largest corporate sustainability initiative. It is both a policy platform and a practical framework for companies that are committed to sustainability and responsible business practices. As a multi-stakeholder leadership initiative, it seeks to align business operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment, and anti-corruption, and to catalyze actions in support of broader UN goals.
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