A new report by investor research firm MSCI found that companies with a higher ESG rating, according to their metrics, have lower capital costs. This is the latest report backing up the business case for responsible investing – showing that investing to deliver better ESG performance can drive value.
The report says, “We identified a strong relationship between a company’s MSCI ESG Rating and its cost of capital, wherein companies with higher ratings benefited from a consistently lower cost of capital during our study period.”
“Responsible investing has long had a place in business strategy, and this new report just confirms what many leading CEOs already know to be true,” said Unlocking America’s Future spokesperson Kyle Herrig. Investors should have the freedom to make the best possible decisions to maximize their bottom line ESG is a growing opportunity that shouldn’t be banned to score cheap political points.
MSCI’s findings line up with other developments and studies over the past few months:
- A new report led by software service company Diligent, which surveyed more than 800 corporate board members across the United States, United Kingdom, and European Union, shows that almost all (96%) directors expect a “continued or stronger” focus on ESG over the next five years. The new data also shows that 94% of directors have already integrated ESG into either their compensation plans or their strategic goals, suggesting a growing alignment between boards and the C-suite.
- The 2024 Sustainability Action Report by Deloitte underscored the growing prevalence of responsible investing in leading industries, noting that in the past year, 85 percent of company executives report making significant or moderate progress towards company sustainability goals.
- A second Deloitte survey–the 2024 ESG in M&A Trends Survey–examined the growing role of ESG in mergers and acquisitions (M&A). The report found responsible investing is a growing factor influencing dealmaking among M&A leaders, with 74 percent of executives claiming they have evaluated their portfolios from an ESG perspective.
- Asset managers are increasingly taking ESG measures into account when making investment decisions–with climate issues serving as the most significant driver of sustainable investments–according to a survey conducted by Morningstar Indexes and Sustainalytics.
- Nearly nine out of ten companies are willing to disclose detailed carbon footprint data beyond what is required, according to a recent survey conducted by global consulting firm Workiva. The greatest majority of companies that said they would voluntarily disclose either all or part of Europe’s Corporate Sustainability Reporting Directive were U.S. companies–with 86% responding that they were willing to voluntarily report climate risk and impact data.
- A May 2024 survey conducted by Morgan Stanley found that a vast majority of large companies view sustainability as an opportunity to increase profitability, creating the potential for high revenues and lower cost of capital. According to the survey, a majority of companies acknowledged the role of sustainability in their long term business strategies, with 85% of respondents saying “that they see sustainability as a value creation opportunity.”
- New financial data suggests green and sustainable bond issuance revenue is steadily growing – and positioned to continue producing increasing returns. Q1 returns for sustainable funds went up 36% from the previous quarter. In the context of the earnings, Morgan Stanley Managing Director Nicholas Tatlow said, “sustainable investing is absolutely around to grow for the medium and long term.”
