Research Article
Quantifying Sustainability-aligned Revenues: From Public to Private Market Approaches
Ashim Paun*
Issue:
Volume 14, Issue 2, June 2025
Pages:
24-33
Received:
7 May 2025
Accepted:
21 May 2025
Published:
21 July 2025
DOI:
10.11648/j.jim.20251402.11
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Abstract: Are more sustainable companies also more profitable? Against a backdrop of greater disclosure in sustainable finance regulation, particularly in the European Union, there has been considerable focus on indicators of environmental, social and governance performance in corporate operations. This focus on the systems and processes which companies have in place - which enable them to produce, manufacture, distribute or deliver a service in ways which limit negative sustainability outcomes - is about de-risking operations and value protection. The ‘other side’ of sustainability in markets is about opportunities and value creation. Public market research from banks and market data firms has analysed correlation between stock price performance and revenues derived earned from sustainability-aligned activities. This question is less easy to answer in private markets, where relevant data is not typically aggregated across firms. Thus, such analysis is largely missing in relation to companies held in the portfolios of private equity investors. This paper draws on a proprietary means of collating data for private equity investments, via which revenues are demarcated to 37 sustainability trends, and finds a relatively weak degree of positive correlation - that across 50 companies, those with revenues which experience greater support from sustainability-linked drivers are slightly more likely to also achieve greater EBIT (earnings before interest and taxes) margins. If the result of the research for this paper were to be replicated for a larger sample, and therefore at a more statistically significant scale, it is the author’s belief that this would demonstrate a high likelihood that companies which derive a greater share of revenues from products and services which are solutions to sustainability challenges, are also able to be more profitable. This would, in turn, be valuable to such companies and industries in attracting lower-cost capital, facilitating growth and accelerating the speed at which economies and societies can address environmental challenges and crisis.
Abstract: Are more sustainable companies also more profitable? Against a backdrop of greater disclosure in sustainable finance regulation, particularly in the European Union, there has been considerable focus on indicators of environmental, social and governance performance in corporate operations. This focus on the systems and processes which companies have...
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