Report: Green-Leaning Companies Do Better in Financial Markets

Add a new study by management consulting firm A.T. Kearney to the column that says “sustainable” and “affordable” don’t have to be mutually exclusive. The Green Winners: The Performance of Sustainability-focused Companies in the Financial Crisis report concluded that in 16 out of 18 industries, companies committed to sustainability have performed better in the financial markets.

The report compared the performances of 99 companies with strong commitments to sustainability (culled from the Dow Jones Sustainability Index and the Goldman Sachs SUSTAIN focus list) against industry averages from May to November 2008. These green-leaning companies outperformed industry averages by 15% over the six months in 16 of the 18 industries. In terms of market cap, the sustainable-leaning companies averaged $650 million in protected market capitalization.
In today’s economic market, sustainability seems like a no-brainer for auto companies. It’s no surprise that those with a reputation for a commitment to it have performed 33 percent better than their peers over the period, according to the study. Media (33 percent), chemicals (30 percent), financial services (25 percent) and industrial goods and services (23 percent) with strong sustainablity commitments also fared well when compared with other companies in their business sectors. The categories where sustainable brands didn’t fare well? Construction and materials (-8 percent) and personal and household goods (-6 percent).

Simply put, A.T. Kearney suggests the market “rewards” companies that put an emphasis on sustainability. However, the firm pointed out that the better-performing companies shared characteristics that indicate sustainability shouldn’t be narrowly defined as simply eco-friendly. This wasn’t just about taking baby-step green measures to produce immediate cost-savings, such as reducing package materials or fuel use. Strong performers shared a focus on long-term strategy, not just short-term gains; strong corporate governance; sound risk-management practices; and a history of investment in green innovations.

The industries examined in the study were utilities, telecommunications, technology, oil & gas, industrial goods and services, construction & materials, health care, insurance, financial services, banks, travel & leisure, retail, media, personal & household goods, food & beverage, automobiles & parts, chemicals and basic resources.