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Two factors that determine when ESG creates shareholder value

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By illuminem briefings

· 2 min read

illuminem summarizes for you the essential news of the day. Read the full piece on Harvard Business Review or enjoy below:

🗞️ Driving the news: Research has demonstrated that incorporating financially material ESG factors into business strategies not only aligns with corporate sustainability but also enhances shareholder value
This insight has led to a significant shift in how ESG investing is perceived and applied in the corporate world.

🔭 The context: Despite political controversy and mixed academic opinions on ESG's impact on shareholder value, the importance of understanding and leveraging ESG for financial performance has become increasingly clear
Two critical factors—managerial ability and supply chain ESG activities—have emerged as key drivers in linking ESG efforts to enhanced shareholder returns.

🌍 Why it matters for the planet: Effective ESG integration into corporate strategies contributes to a more sustainable and equitable world, addressing pressing environmental, social, and governance issues
High-quality management and ethical supply chain practices not only support this goal but also signal a company's resilience and long-term value proposition to investors

⏭️ What's next: The ongoing development and refinement of ESG metrics, along with increased transparency and regulatory oversight, are likely to further solidify the connection between sustainable practices and shareholder value
This evolution underscores the importance of skilled management and responsible supply chains in achieving both sustainability and financial objectives.

💬 One quote: "Both high-ability leadership and high ESG investment are needed to maximize shareholder value."

📈 One stat: Firms with high-ability CEOs and ESG investments outperformed those with low-ability CEOs and ESG investments by 6.64% per year.

Click for more news covering the latest on sustainable finance.


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