In this video, Henri Servaes, the Richard Brealey Professor of Corporate Governance; Professor of Finance from London Business School discusses his research on the intersection of ESG (Environmental, Social, and Governance) and finance.

He reveals that consumers are increasingly interested in how products are made, where they are made, and how companies treat their employees, the environment, and the community. This growing interest is leading consumers to substitute away from companies that are weaker in ESG to companies that are stronger in ESG, resulting in a significant increase in sales for companies with better ESG performance.

His research indicates that a 1% standard deviation increase in environmental and social performance can lead to an almost 9% increase in sales for a given product in a given country at a given point in time. He also discusses how this trend is being driven by changing societal attitudes towards women and the importance of having women in leadership positions. Ultimately, he argues that companies that perform better on environmental and social dimensions are able to sell more products and that this is driving a stock price differential.

However, he cautions that not all academic research supports this finding and that companies need to consider the cost of improving their ESG performance when deciding whether to invest in it. Stay tuned to find out more about the Power of ESG and how consumers are driving companies towards sustainability.

Companies that are stronger in ESG cannot charge a higher price per unit, but they get more sales, because just people buy more of their products...

I've seen consumers now showing a lot more interest in, you know, how the product is made, where the product is made, how the company, you know, treats its employees, how the company treats the environment, how the company treats the community.

The companies that perform better on environmental and social dimensions, do they actually sell more products? Do customers do consumers actually care about the environmental and social performance of the companies? And indeed, we we find that they do.

References:

LBS Bio: https://bit.ly/4c52XaG

Comprehensive Resources Page: https://bit.ly/3yhzE6Q

Researchgate: https://bit.ly/3SqVYC2

Linkedin: https://bit.ly/4fohn8M

Author page: https://bit.ly/4fpKubQ

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