SDGs, financial success and ESG

As we head towards 2030, the world is racing to realize the goals set in the Sustainable Development Goals (SDG). But the world is lagging behind its global goals. The UN SDG Goal Reports highlighted that only about 17 percent of the targets are on track while over a third are stagnating or, worse, moving in reverse. With this, environmental, social and governance (ESG) strategies in investing can be a catalyst for bringing our progress up to speed.

A paper by New York University’s Stern Center for Sustainable Business, in collaboration with Rockefeller Asset Management, examined the relationship between ESG and financial performance in more than 1,000 research papers from 2015 to 2020.

The findings point to a growing consensus that strong ESG practices are not only vital for achieving social and environmental impacts but also correlate with better financial performance. Research found that ESG strategies typically enhance key operational metrics such as return on equity (RoE), return on assets (RoA), and stock price.

In investing, those up for long-term gains particularly benefit. According to one of the studies reviewed by NYU, ESG-focused firms saw returns up to 3.8-percent higher per standard deviation of their ESG scores over the medium and long term.

According to one of the studies reviewed by NYU, ESG-focused firms saw returns up to 3.8-percent higher per standard deviation of their ESG scores over the medium and long term.

Even in times of economic uncertainty, green mutual funds and ESG indices seemed to outperform their conventional counterparts in general based on the Sharpe ratio, which compares the return of an investment with its risk.

This was evident during the 2007–2009 financial crisis when German green mutual funds delivered superior risk-adjusted returns, and the FTSE4Good indices recovered more swiftly after the 2008 crash. Notably, during the Covid-19 market downturn, ESG-focused funds demonstrated greater resilience, with 24 of 26 ESG index funds outperforming traditional investments.

Even in more stable situations, ESG investments yielded greater returns. The FTSE’s Opportunities All Share Index — which includes firms engaged in renewable energy, energy efficiency and environmental services — outperformed the FTSE Global All Cap Index by 4.9-percent annually from 2015 to 2020.

Meanwhile, despite growing attention on ESG disclosures, some studies remind that this alone cannot be a reliable indicator of meaningful ESG impact and financial success. Only 26 percent of studies that focused on disclosure alone found a positive correlation with financial performance compared to 53 percent for performance-based ESG measures.

For the Philippines, a disaster-prone country and an emerging economic powerhouse, embracing ESG strategies will be vital for long-term growth. This opportunity will be in the spotlight in the FAST Forward 2025 International Tax and Investment Conference happening on 26 March 2025.

Organized by the Asian Consulting Group (ACG), the event will bring together global leaders, experts, and innovators to discuss the power of ESG investments in key sectors such as Fashion, AI, Sustainable Cities and Tourism.

Interested individuals may register via https://itic2025.helixpay.ph and expect expert discussions, briefings and meet-and-greets with entrepreneurs, as well as be witness to the much-anticipated book launch of ACG founder Mon Abrea’s “Reimagining the World Without Climate Change.”

As the Philippines aims to solidify its position as a sustainable economic powerhouse by 2030, integrating ESG principles into investment strategies will be key. By investing in ESG initiatives, the country can foster innovation, protect the environment and generate long-term financial returns, making meaningful progress and resilient businesses toward the SDGs.