Ethical Performance
inside intelligence for responsible business


socially aware business 'will reap equity reward'

February 2000

A Swiss bank has concluded that socially responsible European businesses will ‘inevitably’ reap benefits on the equity markets over the next few years, even though it failed to find a statistical link between the social performance of companies and their stock market value.

Basel-based Bank Sarasin says that an in-house analysis could find no correlation between the social performance of 65 major European companies and their returns on stock markets.

However, it is ‘convinced that it is purely a matter of time until socially compatible business management is also honoured with an appropriate premium on capital markets’.

It concludes: ‘this inevitably means that investments in socially progressive companies are likely to be particularly attractive’.

The bank’s analysis of European stock market returns between mid-May 1997 and mid-May 1999 found a clear and ‘amazing’ link between environmental performance and equity yields, with the best performing companies adding around four per cent to their stock market value.

But analysis of social performance – using social ratings compiled by Bank Sarasin’s sustainability research department – found neither a negative nor a positive correlation between social factors and equity value.

Bank Sarasin says this may be because understanding of ‘complex social cause and effect mechanisms’ is still rudimentary among investors and the public, ‘and has not yet extended to all the interactions a company has with its social environment’.

The bank also points out that it is currently harder to pinpoint cost savings from improved social performance.

It adds: ‘the potential correlation between social and financial performance has hardly been systematically studied to date, and this may be one reason why the economic rationale of socially compatible behaviour has so far not been widely acknowledged’.

The criteria Bank Sarasin’s sustainability research department used to assess the social performance of a company included customer loyalty, relationships with suppliers, working conditions, worker participation, relationships with trade unions, discrimination in the workplace, product quality and the company’s record on human rights.

Analysts Christoph Butz and Andreas Plattner argue that if the environmental performance of a company can have an effect on its equity value, then social performance must also do so.

They claim that the common features between environmentally and socially compatible business practices make them ‘convinced of the benefits of performing a comprehensive rating of a company’s social criteria’.

Bank Sarasin, which has offices in Zurich, Geneva, Hamburg and London, says it will now carry out a study that covers a period longer than two years.


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