When does it pay? Linking carbon and financial performance

Starting from very fundamental investigations, John Spicer was one of the first authors to conduct an econometric study that investigates the economic consequences of ecological and social efforts. Ever since then, a substantial body of more recent management research has sought to address this question and investigate the relationship between corporate sustainability performance (CSP) and corporate financial performance (CFP) from different angles. However, there continues to be much confusion within this debate. At the 2010 Academy of Management conference in Montreal, papers presented in a session entitled “Examining the corporate social performance–corporate financial performance relationship” offered various results: no relationship, a positive relationship, or even a curvilinear relationship. These results are reflected by scholars’ attempts to detect an outperformance of mutual funds or specialized indexes that invest in firms with enhanced CSP: Empirical studies suggest that sustainable investments may either outperform the market, underperform the market, or make no difference in terms of their risk-adjusted financial returns.

Related Subject(s): Economic and Social Development