ESG Investing: Evaluating a CEO using the 4 Cs of Good Corporate Management...

A key component of a high-ESG stock is a stellar management team. Here are four qualities that define an exemplary leader, which should be top of mind for ESG investors.

The Motley Fool's environmental, social, and governance (ESG) team is in search of ESG compounders, or companies that are growing profitably by doing good for the world. These are very high-quality businesses run by excellent management teams that strive to scale sustainably and leave a positive impact on the world.

As ESG investors, we evaluate potential ESG compounders using a 10-point checklist, and we believe owning a basket of these high-scoring companies will outperform the market in the long run. There's plenty of evidence that companies with strong ESG profiles generate higher returns on invested capital (ROIC) and higher sales growth and beat the market over time. One massive research project concluded that out of 200 studies on ESG, 90% showed either a positive relationship to corporate financial performance (CFP) or at least no negative relationship.

Similarly, Harvard Business School professor George Serafeim found:

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Published on Sept 3, 2019