Do sustainable companies have a better financial performance? A study on Brazilian public companies

Abstract

Increasingly, companies are taking initiatives to mitigate the negative social and environmental impacts to address the emerging needs of society. In the financial realm, stock markets created indices to offer investors the option to prioritize sustainable companies. In Brazil, the initiative came from the São Paulo Stock Exchange by releasing the Corporate Sustainability Index. In this paper, we analyze the financial and economic performance of companies listed in the Corporate Sustainability Index in comparison with the performance of companies listed in the São Paulo Stock Exchange Index. For that, profitability and liquidity ratios were calculated, and statistical tests – specifically cluster and nonparametric analysis – were performed to validate possible trends, similarities, or differences observed in each group of companies. Based on our analysis, we found no evidence of economic and financial performance differences between companies from each of the studied indices. In fact, our findings show that other characteristics, such as sectorial classification, have more influence on firms' economic and financial performance than their investments in sustainable initiatives. The research contributes to the body of knowledge in the field of corporate sustainability by utilizing a different methodology than similar studies have used, incorporating different accounting ratios and new statistical analyses of data from the emerging Brazilian market.