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CSR and Financial Performance: Cause and Effect?

By Jessica Stannard-Friel on February 2, 2006No Comment

Hewson Baltzell, President of Innovest Strategic Value Advisors, seemed to offer up the Holy Grail of the CSR world.  With one slide in his presentation at the Conference Board’s Leadership Conference on Global Corporate Citizenship, he demonstrated empirically that doing well is, in fact, a function of doing good.  Or did he show that doing good is instead a product of doing well?  Or that both are caused by a hidden third factor?

What Baltzell showed was a slide demonstrating the financial performance of the 2006 Global 100 Most Sustainable Corporations in the World.  He compared that performance against the MSCI World Index, an equity index aggregating data from around the world to create a full picture of global performance.  From 2000-2005, the Global 100 consistently outperformed the MSCI World Index; at the end of the five-year period, it had outperformed the World Index by 7.11%.

The Global 100 list was created in 2005 by Corporate Knights, Inc., a media company based in Canada, and Innovest Strategic Value Advisors, an investment research company that focuses on “non-traditional” factors impacting shareholder value and risk, including environmental, social, and governance factors.  According to Corporate Knights and Innovest, the companies on the list, relative to other companies in their industries, are the best equipped to responsibly address the risks and opportunities associated with social, environmental, and governance matters.  To be considered for inclusion, companies must be publicly-traded and included in the MSCI World Index.

To study the relative performance of the two groups, Innovest examined the stock performance of the companies on the 2006 Global 100 list, looking back over each company’s data from January 1, 2000 to December 31, 2005.  The findings were then compared to the performance of the MSCI World Index over the same period of time.

Based on their inclusion on the Global 100, the companies in question are certainly doing good.  And as a group, their out-performance of the market indicates that they are also doing well.  So what is the relationship between these two outcomes?  Does a company’s strong CSR performance lead to its strong financial performance?  Is the strength of its CSR program made possible by previous financial success?  Or does a third, unknown factor lead to excellence in both the CSR and the financial arenas?

Next month, ICP analyzes these issues in depth, exploring possible explanations for each possibility. 
Has your company found a direct relationship between CSR and financial success?  If so, please email Jessica Stannard-Friel ( with “CSR” in the subject line; emails may be included in a future ICP article.

For further details about the Global 100, including a detailed methodology of both the selection process and the Outperformance Study, see

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