Environmentally responsible companies perform as well or better financially than bigger polluters in the same industry category, according to the findings of a new study by the Investor Responsibility Research Center, Washington.
The study tested whether environmentally conscious investment in S&P 500 firms ranking in the top half of environmental performance in their industry group provided a poorer return than investment in a neutral strategy. Industry balanced portfolios were constructed to compare returns of "high" pollution portfolios to "low" pollution portfolios over various time periods.
The findings showed that in 80% of comparisons, the low pollution portfolios outperformed the high pollution portfolios, based on return on equity, return on assets, total return to stockholders and risk-adjusted return to shareholders.
Portfolios constructed of companies with high toxic chemical releases provided significantly lower risk-adjusted returns. In 1989, the low toxic portfolio returned 32.1%, compared with 23.7% for companies with high toxic emissions. In 1991, companies in a low oil spill portfolio returned 29.4%, compared with 20.16% for companies with high incidences of oil leaks and spills.