"Sustainability leaders" Outperform – Robeco

 

Environmental Finance, 16 July 2009 - Companies deemed 'sustainability leaders' using analysis developed by SAM have outperformed their peers, according to research carried out by Robeco.

 

A portfolio of the top 20% of 400 global companies, in sustainability terms, outperformed the total portfolio by an annualised 1.48% between 2001 and 2008, according to the Dutch asset manager's quantitative strategies department.

 

“Alpha is created by analysing underresearched sustainability factors which impact the companies' long-term value,” said Stephanie Feigt, chief investment officer at Switzerland-based asset manager SAM.

 

According to a report from Robeco released on Monday, the sustainability analysis carried out by SAM “act[s] as a suitable proxy for quantifying the value of a firm's intangible assets”.

 

“By analysing the sustainability profile of companies, SAM gains additional insights that facilitate the selection of stocks offering the potential for attractive long-term returns, while investing in responsible corporate citizens,” says the report.

 

The portfolio analysed was made up of those companies that participated in SAM's annual sustainability assessments between 2001 and 2008. Robeco then constructed five portfolios, according to their sustainability scores, and reweighted to neutralise the effects of market capitalisation, sector and country.

 

The research found outperformance in both bull and bear markets, and from all three geographic regions examined – Europe, the US and Japan – and found that SAM's sustainability performance is weakly correlated with stock selection techniques such as valuation or momentum investing. “The combination of SAM's sustainability criteria with traditional stock selection criteria provides diversification benefits,” the report says.

 

“Overall, the findings of this research provide us with credible evidence that firms adhering to sustainability are not contradicting their primary function, which is to maximise the profits of shareholders,” the report concludes.

 

“On the contrary, it would appear that the puzzle of corporate financial performance broadly encompasses both financial and extra-financial considerations.”