Share scare for thems that care

This article in the “Business of Green” special section in today’s New York Times describes a study by two Dartmouth professors that shows stock performance suffering after companies announced that they had joined a group dedicated to combating climate change.

It reminded me of something I read about in a special report on corporate social responsibility in The Economist a couple months back: the contention that responsible practices may not actually add value to business. The article, titled “The Next Question: Does CSR Work?,” pointed out that two of the best-known sustainability indexes—the Dow Jones Sustainability Indexes and the FTSE4Good—tend to underperform the market.

I don’t buy the contention—I think it’s simply a question of timescale.

And indeed, the Economist article went on to refer to a recent academic review of 167 studies over the past 35 years that concluded “there is in fact a positive link between companies’ social and financial performance” (albeit a weak one). It also pointed to Goldman Sachs’s GS SUSTAIN model, which considers responsible environmental, social, and corporate-governance practices to be “‘a good overall proxy for the management of companies relative to their peers’, hence indicative of their chances of long-term success.”

That’s reassuring. As our planet starts having to pay the bills for its dwindling resources, responsible practices will undoubtedly enhance value. The time to act is now.