Does Sustainability Increase Financial Performance? A Quantitative Comparison between the S&P 500 and S&P 500 ESG Factor Weighted Index

Abstract

As the business environment continues to be influenced by stakeholder forces, including sustainability reporting and sustainable operations, a question that continues to be asked is if such a mindset delivers financial returns. While there is increased interest and attention on the areas of sustainability reporting and financial returns, quantitatively addressing this question is a complicated task. Leveraging the proliferation of ETFs, this analysis compares the performance of the S&P 500 ESG Factor Weighted Index versus the S&P 500 during the period 2014-2016. As business decisions are driven in large part by the financial performance of the organizations, this research is applicable to both practitioner and academic members of the accounting community. Additionally, the second aspect of this research attempts to establish a connection between sustainability, integrated reporting, and begin the analysis whether or not there appears to be a connection between performance and integrated reporting.