The ESG Initiative at the Wharton School

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ESG Investments Lead to Higher Sales

Outlet: Knowledge at Wharton

Consumers really do care about ESG, according to research by Wharton visiting professor Jean-Marie Meier.

The disparity between consumer concern for the environment and social issues and actual action, termed the “say-do gap,” has long confounded businesses dedicated to ESG (environmental, social, and corporate governance) practices. However, recent research co-authored by Jean-Marie Meier, a visiting professor of finance at Wharton, provides fresh evidence that consumers are indeed backing their values with purchasing power, contrary to anti-ESG claims.

Drawing on data from Nielsen Retail Scanner spanning 2008 to 2016, the study found a strong positive relation between a company’s Environmental and Social (E&S) rating and the sales performance of its products in local markets. For every one-standard-deviation increase in a company’s E&S rating, there was a 9.2% surge in sales for the average product sold within the same U.S. county the following year.

“Consumers really are putting their money where their mouth is,” Meier said. “This is good news for firms that want to pursue ESG practices. And for others that are unsure, this paper is evidence that it might be worth it.”