ESG and Resilience in Corporate Performance

ESG investing, stakeholder capitalism, economic intuition (that which makes a company operationally succeed, in turn makes it a potential for equity investment or credit lending) – I have always written that they are different names for the same thing. The results of the statistical model by Drucker Institute proves this point yet again. Companies that proved to be more “resilient” in the Covid 19 recession and needed to have fewer layoffs to stay efficient were those that scored better across the five dimensions of customer satisfaction, employee engagement & development, innovation, social responsibility and financial strength in their model. In the Drucker 100 best firms, 8% had layoffs versus 15.6% of S&P 500 companies.

Background to the Drucker model: The correlations between each of these five dimensions (financial strength, customer satisfaction, employee engagement & development, innovation, social responsibility) and the measure of overall effectiveness was remarkably high (range of 51% - 83%). Companies in Drucker 100 scored at least 7 points higher on average than in S&P 500, across all five categories.

 References: (a) Wall Street Journal, What Sets Some Companies Apart in the Current Crisis, August 3, 2020 (b) Drucker Institute, A Fresh Cut at the Numbers, Issue #2, January 2019