The Financial Impact of the Corporate Sustainability Index in Brazil

A few months ago, my good friend Giles Hutchins, also a colleague of Biomimicry for Creative Innovation (BCI) wrote an article outlining research carried out by Northfield Information Services (a global consultancy advising many of the largest banks and asset managers) which set out to compare ‘living’ firms that mimic nature with the more traditional mechanistically-focused firms. This resulted in the Global Living Asset Management Performance (LAMP) Index®. As Giles wrote: “The conclusion drawn from the detailed research is that businesses that model based on living systems (businesses inspired by nature) gain market share and out-perform those that model on mechanistic systems.”

Roberta Simonetti and Artaet Martins

Roberta Simonetti and Artaet Martins

I thought that I would provide a Brazilian perspective, and discuss research carried out by The Centre for Sustainability Studies at FGV (EAESP-FGV) and BM&FBOVESPA, the Brazilian stock exchange. The research was recently presented at the Strategy Execution Summit by Roberta Simonetti.

In Brazil, a comparative analysis of the performance of SRI-ranking equity funds and Ibovespa performance shows that the former provided a greater accrued financial return over the last six years, which also includes a crisis period:

performance of SRI-ranking equity funds and Ibovespa performance

In addition, companies who are a part of the Sustainability Index show far less volatility:

VOLATILITY (% per annum)

Studies like this are now catching the attention of analysts and investors, who previously questioned the wisdom of investing in sustainable practices and strategies, and that there can be some extremely important tangible gains. According to the BM&FBOVESPA Sustainability Guide (BM&FBOVESPA, 2010), “sustainable companies are more capable of identifying new business opportunities, anticipating legal and social pressures, and lowering production costs thanks to decreased waste and savings, increased talent attraction and retention, easier access to capital, less risk exposure, consumer loyalty, and better internal alignment with adopted practices and policies”.

The English language version of the report can be downloaded here: www.gvces.com.br/arquivos/136/The-value-of-ISE.pdf

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