The growth trifecta

Financially successful companies that integrate environmental, social, and corporate governance (ESG) priorities into their growth strategies outperform their peers if they also overachieve on fundamentals, senior partner Lucy Pérez and colleagues find in an analysis of more than 2,200 public companies. Those that outperformed in ESG, profit, and growth produced two percentage points of total shareholder returns above peers that outperformed on financial metrics alone.

Outperformance in environmental, social, and governance seems to boost outperformance but not compensate for underperformance in profit and growth.

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A Venn diagram shows potential percentage-point improvements made in total shareholder return when firms outperform in environmental, social, and governance while also outperforming in profit and growth.

The amalgam of these three outperformances shows a potential increase of returns of 7 percentage points or more. Below the main element, the Venn is broken down into all of the potential correspondences, providing more limited growth or loss.

Footnote: Firms outperforming in environmental, social, and governance (ESG) are those whose change in S&P Global ESG score between 2017 and 2021 was above industry and regional peer average or who had a 2017 score ≥85 and an absolute-score improvement.

Source: S&P Global ESG scores, 2017–21; Corporate Performance Analytics by McKinsey.

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To read the article, see “The triple play: Growth, profit, and sustainability,” August 9, 2023.