Skip To Content

The Forces Driving Corporate Sustainability

Investors, government regulators and nongovernmental organizations are pushing for increased disclosure of environmental, social and governance factors

MOST EARLY PRACTITIONERS of sustainable and impact investing were limited to a single strategy known as negative screening. Simply put, this strategy avoided investing in companies connected to products considered harmful to society, like weapons or tobacco. Portfolios constructed using negative screening often underperformed broader stock indexes, leading sustainable investing to be viewed as a niche strategy, one more appropriate for investors who were willing to accept lower investment returns in order to invest according to their values.

Over the past decade or so, much has changed. Modern sustainable investing is focused as much on return potential as on positive societal and environmental change. Investors are finding they can pressure companies to be more transparent about the sustainability of their supply chains and the environmental and societal impact of their production processes and products. Similarly, environmental, social and governance (ESG) factors have become a more important part of the investment process. There has also been a parallel growth in corporate ESG self-reporting, third-party data analysis, and public and investor demands related to ESG. Amid all these advances, assets under management focused on sustainability have grown from negligible to about one in four dollars of total managed assets.1

Growth in corporate sustainability disclosures (see exhibit 1) and other ESG factors has allowed investors and independent rating agencies, along with academics and stock exchanges, to form increasingly reliable assessments of the risks and opportunities associated with ESG issues and their effect on company performance. While some challenges remain in regard to evaluating sustainability reporting, organizations such as the Sustainable Accounting Standards Board (SASB) and the Global Reporting Initiative (GRI) have developed important sustainability reporting standards that can provide guidance to reporting companies.

Exhibit 1: S&P 500 Companies Sustainability Reporting

The percentage of S&P 500 companies reporting sustainability data has risen from 20% in 2011 to 86% in 2018. Source: Governance & Accountability Institute, Inc. 2019.

Source: Governance & Accountability Institute, Inc. 2019.

Voluntary Reporting

An increase in the number of corporations that voluntarily report sustainability data has been driven by factors such as:

  1. The growing importance of brand recognition and other intangible assets.
  2. From negligible a decade ago, assets deployed in sustainable investment strategies have grown to more than $1 of every $4 under professional management in the U.S.1
  3. A rise of investor networks such as the Principles for Responsible Investment (PRI), a United Nations supported organization has 2100 signatories.
  4. Outside entities such as government regulators, stock exchanges and nongovernmental organizations (NGOs) prompting a rise in the availability of sustainability data.

As sustainability reporting has grown, stakeholders have helped create a reinforcing cycle that has helped improve the depth of ESG reporting (see exhibit 2). Here’s how it has often worked: Investment managers, institutional investors and others, finding available ESG data useful yet limited, have engaged with companies to improve corporate disclosure. Examples of this include expanding the kind of information released and heightening data accuracy. Third-party organizations have then created guidelines on sustainability standards and ESG metrics that reinforce the cycle.

Exhibit 2: Corporate Sustainability Reporting Cycle

The corporate sustainability reporting cycle describes a company’s initiatives, policies, and performance on ESG issues. It consists of six components: regulatory disclosure of environmental or social impact; data collection; ESG ratings – assessment of a company’s performance with respect to ESG issues; integration of ESG considerations to an investment process; responsible investor groups; and addressing the sustainability topics that may have material impact on the financial condition or operating performance of companies in an industry.

Source: U.S. Trust. 2017. This is intended for illustrative purposes only. It is not intended to be representative of all ESG data.

What this means for investors

For investors, the growing availability of corporate sustainability and ESG data opens the door for new investment opportunities while also creating a complex landscape that requires expertise and institutional knowledge to navigate. Working with an advisor, investors can utilize the enhanced data to better evaluate and pursue both financial and environmental or social impact outcomes. To find out more about corporate sustainability reporting, read the full report here or contact an advisor today.

3 Questions to Ask Your Advisor

  1. How can I find out more about investing in sustainable companies?
  2. How can I find out about companies’ ESG ratings?
  3. Could we review additional ways to align my investments with the causes and issues that are important to me?

Connect with an advisor and start a conversation about your goals.

9am - 9pm Eastern, Monday - Friday

Have questions for your financial advisor?

Connect with to continue the conversation.

“Report on U.S. Sustainable, Responsible and Impact Investing Trends,” U.S. SIF (Forum for Sustainable and Responsible Investing), 2018.

Impact investing and/or Environmental, Social and Governance (ESG) managers may take into consideration factors beyond traditional financial information to select securities, which could result in relative investment performance deviating from other strategies or broad market benchmarks, depending on whether such sectors or investments are in or out of favor in the market. Further, ESG strategies may rely on certain values based criteria to eliminate exposures found in similar strategies or broad market benchmarks, which could also result in relative investment performance deviating.


You need to answer some questions first

Then we can provide you with relevant answers.

Get started