Ten Things to Know about Responsible Investment and Performance

New York – Today, GovernanceMetrics International (GMI), a provider of corporate governance and ESG research globally, released a report on the relationship between responsible investments and performance. For this report, GMI reviewed a large body of literature on the topic and uncovered the top ten issues investors should know about responsible investing and performance.

The report, titled Ten Things to Know about Responsible Investment & Performance, reviews over two dozen studies conducted over the past three years on the empirical impact of responsible investment strategies on performance. The top ten highlights in the report are:

  1. RI portfolios perform comparably to conventional ones.
  2. Definitions of RI vary (e.g. stakeholder focus, environmental focus or governance focus, among others).
  3. The RI strategies available to investors are numerous (e.g. negative screening, positive screening, best in class approach, asset class specificity, direct dialogue with companies, etc.)
  4. RI does not necessarily affect diversification.
  5. RI professionals analyzing ESG factors sometimes identify unpriced risks and opportunities that are soon recognized by the market.
  6. In some cases, the ESG risks and advantages identified by RI professionals are either already priced by the market, or will only affect stock prices in the long term.
  7. The impact of ESG factors varies with industry and firm.
  8. RI is a specialized skill.
  9. RI may confer benefits by correcting the externalization of costs, and encouraging positive externalities.
  10. “Values” can be linked to “value”.

The literature supporting GMI’s report was sourced from the Social Science Research Network (SSRN). Other reports by GMI related to the topic of responsible investing include “Introduction to the Principles for Responsible Investment”, and the “Beginners Guide for North American PRI Signatories”.

The author of the report released today is Kimberly Gladman, CFA, PhD, the director of research and risk analytics at GMI. Dr. Gladman is available for a brief interview with interested parties. Please contact Cheri Gaudet, cgaudet@gmiratings, 207-553-5604.

 

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