Article at a glance

• US companies leading on transformative sustainability behaviours delivered an extra 4.56 per cent  return above market expectations from 2016 to 2024, according to research by the Leonardo Centre on Business for Society at Imperial Business School  

• Investors can help drive transformation by directing capital towards companies making meaningful changes and using their influence to encourage further progress. 

• High environmental, social and governance (ESG) ratings did not produce comparable returns: what drives value is embedding sustainability into operations and innovations, as opposed to philanthropy or communications. 

For decades, corporate sustainability has largely been framed around ethics and public relations, with governments driving change through regulation and taxation. Against this backdrop, political opposition and scrutiny of ESG-labelled investments, particularly in the US, have fueled the narrative that sustainable investing is in retreat.  

But new research by Imperial Business School’s Leonardo Centre on Business for Society suggests the relationship between sustainability and financial performance deserves a fresh look. Rather than abandoning sustainability, the market may be repricing it. Investors are looking for evidence that sustainability can strengthen business performance and create shareholder value. 

In A Behavioural Revolution, launched in 2025, researchers found that sustainability can generate financial value when companies embed it into how they operate, innovate and compete, rather than focusing only on external-facing commitments such as philanthropy and communications. 

The findings are striking, particularly in the US. The US Finance for Impact Report, led by Dr Shuying (Melody) Wu, Research Fellow in Sustainable Finance at the Leonardo Centre, found that US companies most committed to transforming their businesses through sustainability generated an annualised alpha of 4.56 per cent between 2016 and 2024. Alpha means the extra profit or returns the portfolio made above the market average, calculated per year. It also proved that these companies are more resilient during market downturns. 

The evidence base for Imperial’s Finance for Impact Research is a unique innovation in itself - the GOLDEN Sustainability Dataset - leverages the power of AI to identify more than 2.6 million sustainability initiatives from around 88,000 reports published by over 18,000 companies globally. Researchers then apply a second new and novel concept: the Leonardo Centre’s Business Impact Maturity framework, a methodology for classifying initiatives according to what companies do and how deeply sustainability is integrated into their business.  

The research is still relatively young and has so far focused on finance, but the potential to explore other hypotheses about the relationship between identifiable corporate behaviours and the impacts they create is vast. 

What counts as transformation? 

Drawing on concepts from psychology, Business Impact Maturity provides a way to classify business behaviours according to their level of development, helping distinguish between actions that simply signal intent and those that drive meaningful real-world impact. 

Advocacy includes externally oriented or philanthropic activity; preparation covers capability-building, such as employee development and sustainability processes. Transformation goes further, embedding sustainability into operations, innovation, products and business models. In the US analysis, transformation was the only category consistently associated with statistically significant excess returns. 

Transformative actions can include investing in research and development, launching new products and redesigning processes. These changes can improve productivity and resilience and create growth opportunities. By contrast, activities that remain largely symbolic or external-facing may enhance a company’s reputation without changing the underlying economics of its business. 

Conventional ESG ratings can provide information about companies’ disclosures, governance structures and management of sustainability-related risks. But they do not necessarily show whether a company is translating sustainability into business transformation. In the research, highly rated ESG portfolios did not generate the same consistent alpha as portfolios of companies transforming their operations and innovation. 

The sustainability that pays differs by market 

Across geographies, sustainability creates value when it changes the business, although the sustainability actions most closely associated with financial returns differ by market. 

For instance, the Japan Finance for Impact Report, which covers fiscal years 2012 – 2024, finds that sustainability-led innovation, rather than transformation in its broadest sense, is the clearest source of value creation. 

In Japan, companies that focused on sustainability-led innovation also outperformed the market, delivering returns 3 per cent above expectations annually. An investment strategy that bought shares in companies leading on innovation and sold shares in those lagging behind delivered annual returns 4.7 per cent above expectations.. 

Investors and CEOs hold the lever 

The message for investors is clear: capital allocation can reward companies that turn sustainability commitments into meaningful business change.  

Index providers can create indices ranking companies on sustainability transformation, which passive managers can track. Passive investors can influence investment mandates, while long-term and public capital can direct funding towards companies driving transformation. Active investors can encourage change through board engagement, shareholder proposals and examples of best practice.  

For business leaders, the implication is equally direct. Doing good and generating returns need not be a trade-off. But greenwashing and box-ticking to secure a better ESG score will not necessarily deliver either. The opportunity lies in changing how the business works — and demonstrating the value that change creates.

The Leonardo Centre on Business for Society advances responsible business through research and collaboration with scholars, businesses and global institutions. It is seeking partners to co-develop investment solutions and will present its research with investors and business leaders at COP31 (9–20 November 2026) and the World Economic Forum’s Annual Meeting in Davos (18–22 January 2027). 

Should you like to explore collaboration with The Leonardo Centre directly, please contact Melody Wu, Research Fellow in Sustainable Finance at the Leonardo Centre on Business and Society. 

“The conventional story, and there is some substance to it, is that firms face a clear trade-off: you can either do good or you can do well, but you cannot do both. … This new research tells us that story may no longer hold. It points to a fundamental shift in the way we should think about sustainability: sustainability is a source of alpha.”

— Richard Damania of the World Bank in a keynote at a Leonardo Centre–Ceres event 'Unlocking Shareholder Value Through Corporate Behaviour Insights.'