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Oxford University report links sustainability to profits

Robust sustainability practices, including waste prevention and recycling, boost companies’ profits and share prices, a report has suggested.

Researchers at Oxford University and assets management company Arabesque Partners reviewed 190 academic studies, industry reports, newspaper articles, and books and concluded that a strong focus on environmental, social and governance (ESG) has a positive impact on firms’ financial results.

Some 88% of the sources analysed showed that solid ESG resulted in better operational performance and 80% suggested that stock prices were positively influenced by good sustainability practices.

“Proper corporate environmental policies result in better operational performance,” the report says. “In particular, higher corporate environmental ratings, the reduction of pollution levels, and the implementation of waste prevention measures, all have a positive effect on corporate performance”

Researchers noted the example of a Harvard Business Review article claiming that pollution, including waste generation, translates to inefficiency, as it is a sign that resources have been used “incompletely, inefficiently, or ineffectively”.

They also mentioned Marks and Spencer’s ‘Plan A’ to source responsibly, reduce waste and help communities, which resulted in savings of $200m (£123m) annually.

Omar Selim, chief executive at Arabesque Asset Management, said: “This report ultimately demonstrates that responsibility and profitability are not incompatible, but in fact wholly complementary.”

He added that over 72% of companies of the S&P500 are now reporting on sustainability, which demonstrated a growing recognition of the strong interest expressed by investors.

  • MRW research has found that fewer than half of the largest UK corporates set out targets for waste prevention, recycling or landfill diversion and are prepared to announce them publicly.

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