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Ethical, Stakeholder-Focused Companies Yield 2x Profits of S&P 500

Torrey Project finds that you no longer have to choose between maximizing profits and doing good in the world

SAN DIEGO, Nov. 11, 2019 /PRNewswire/ -- 

Financial and Social Returns Align           
Torrey Project's latest study shows that if you had invested a dollar 20 years ago in the S&P 500 index, that dollar would have doubled in value and would be worth about $2 today. If you had invested that same dollar in a portfolio of only the most ethical companies, today that dollar would be worth $3. But, the best returns of all were reserved for people who invested in stakeholder-focused companies. A dollar invested 20 years ago in stakeholder-focused companies would actually be worth a whopping $4 today (twice the return of the S&P 500 index), and would give you the added benefit of knowing that your investment has gone toward supporting businesses who had made the world a better place for all. Financial and social returns go hand in hand.

Ethical and Stakeholder-Focused Companies Yield Much Higher Returns than S&P 500 over 20-year period. (S&P 500 doubled, Ethical Companies Tripled, and Stakeholder-Focused Companies Quadrupled in Value over 20 Years.)

Link to full study: https://www.torreyproject.org/post/ethics-stakeholder-focus-greater-long-run-shareholder-profits

Stakeholder-Focused Companies
So what is a stakeholder-focused company and why do they deliver outsized returns? Stakeholder-focused companies try to balance returns to their various stakeholders including employees, suppliers, partners, shareholders and customers as well as the environment, local communities where they operate, and society at large. Stakeholder-focused business is an alternative to the more traditional form of investor-focused business, which prioritizes (often short-term) returns to investors over the needs of the other stakeholder groups.

Interestingly, it seems that investor focused businesses are actually falling short on the one metric they seek to optimize (investor returns) when compared to businesses who seek to take a more sustainable, humane, and stakeholder-focused approach to business. This fact may have been one of the reasons why the Business Roundtable, an influential group composed of the CEOs of major US companies released a statement in August 2019 where 181 top US CEOs committed to adopting a stakeholder-focus for their companies.

Impact Investing
Investors are always trying to get the best returns for their money, and many are becoming interested in investing for the social good. Impact investing and ESG-focused funds have become increasingly common over recent years. However, a misperception still exists where many people believe that they need to sacrifice high returns in order to invest in a way that yields a positive social impact. This study is just one more piece in the growing library of evidence showing that positive social impact and ethical behavior actually go hand in hand with outsized investor returns.

About Torrey Project
The analysis was conducted by Torrey Project, a San Diego, CA based charitable organization that seeks to be the global catalyst for stakeholder-focused business. Founded and led by a team of seasoned global business leaders, Torrey Project seeks to effect change in four areas: schools, startups, established businesses, and financial markets.

Torrey Project runs a startup incubator to train social entrepreneurs and business leaders who wish to adopt a stakeholder approach to business. Torrey Project also works in high schools and universities throughout the USA to teach principles of long-term thinking, social impact, and conscious capitalism to students. Soon Torrey Project will launch GAIN (the Global Accountable Investment Network) which will ease the flow of conscious capital to stakeholder-focused businesses. All of Torrey Project's programs have the long-term goal to address and resolve the root issues of environmental degradation and socioeconomic injustice through the creation of better, more sustainable and more conscious business systems.

Sources
The idea of stakeholder-focused capitalism originated with Edward Freeman, a professor of business administration at the Darden School of the University of Virginia. The list of ethical companies from Torrey Project's study came from Ethisphere, an organization that defines and measures corporate ethical standards and recognizes companies who excel for their ethical behavior. The list of stakeholder-focused companies in the study comes from Raj Sisodia's book "Firms of Endearment," a book that examines some of the world's most stakeholder-focused companies.

Next Steps
What can you do to support the cause of stakeholder-focused capitalism?

  • Read Torrey Project's study in greater depth.
  • Invest in stakeholder-focused companies.
  • If you're a business leader, adopt a stakeholder approach.
  • Consider donating to Torrey Project to accelerate the global transition toward a better form of capitalism for all.

Torrey Project is based in San Diego and can be reached by visiting: www.TorreyProject.org or emailing info@torreyproject.org.

 

(PRNewsfoto/Torrey Project)
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