Sustainable Investments: Return and Risk
DOI:
https://doi.org/10.33423/jabe.v26i4.7265Keywords:
business, economics, sustainable investments, return, riskAbstract
Empirical evidence shows that investors and institutions are interested in socially responsible and sustainable investments due to either their values for making a positive impact on the society or because of the perceived rewards and less downside risk of such investments. In addition, a country’s rule of law, culture, values and norms help promote socially desirable and sustainable investments. Furthermore, money flow appears to be larger for firms with high environmental, social and governance scores. Studies generally show a lower cost of capital for socially responsive firms and perhaps a better corporate value. This is due, in part, to lower risk premium demanded by investors. A survey shows that potential investors rank the environment the highest, 79 percent, followed by products with a rank of 48 percent, among other socially desired goals.
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