According to a survey, environmentally conscious businesses earn 7% more.
ENVIRONMENTALLY CONSCIOUS and ESG investments have grown in popularity in recent years, but a new study reveals that they also provide greater returns and fewer risks.
The University of Sussex Business School analyzed the stock performance of companies in the S&P 500 with emissions below the industry average versus their polluting equivalents between 2005 and 2018.
According to the report, environmentally conscientious businesses provide 7% higher returns while posing 30% less risk.
Environmental companies outperformed other industries in industry-specific portfolios, with the highest returns in consumer discretionary, energy, financial, and health care.
Reduced greenhouse gas emissions helped the most environmentally sensitive industries, such as the energy sector.
The study also discovered that a 10% reduction in pollution output would result in a three percent increase in share price for an energy company.
Other consumer staple industries, such as real estate, saw no gain in share price as a result of reducing emissions.
Dr. Panagiotis Tzouvanas and Professor Emmanouil Mamatzakis of the University of Sussex and Birkbeck, University of London conducted the research.
According to the analysis, a $100 investment in a green company in 2005 would yield $45 more in 2018 than investments in polluting competitors.
Environmental enterprises had to have greenhouse gas emissions that were 10% lower than the national average.
This groundbreaking study is the first to look at a company’s environmental performance and risk-adjusted profits.
According to the authors, this research implies that environmentally conscious investing will increase the efficiency of financial markets, justifying more investors switching to environmental stocks.
This study also shows that the number of measures aimed at reducing greenhouse gas emissions should expand, not only to help the environment but also to boost global market performance.
“Our study indicates that investing in environmental stocks pays off and is justified from a portfolio selection standpoint,” stated Dr. Tzouvanas, Lecturer in Finance at the University of Sussex Business School.
“The research also suggests that investing in clean technologies might be profitable for a company to some extent.
“Our findings demonstrate that stocks with better environmental performance have higher stock valuations and benefit from fewer related risks, especially idiosyncratic risk.
“We have discovered compelling evidence that portfolio selection of.”Brinkwire Summary News”.