Unlisted Companies Boosting EBITDA and Boosting Employee Satisfaction, Focus on ESG
In a groundbreaking analysis, the joint study by Bain & Company and EcoVadis titled "Does ESG Engagement Create Value?" reveals a positive correlation between ESG engagement, gender diversity, and financial performance in unlisted companies.
The study, which analysed the ESG results of 100,000 companies, demonstrates that companies with higher ESG scores, particularly those with stronger gender diversity practices, tend to create more value and achieve better financial outcomes. This finding suggests that active ESG engagement, with a focus on gender diversity, contributes to improved financial performance even in companies that are not publicly listed.
ESG engagement, as measured through sustainability ratings such as EcoVadis scores, helps companies enhance their internal processes and stakeholder trust, which in turn impacts their value creation positively. Gender diversity, a crucial component of the social aspect within ESG criteria, is connected to improved governance and operational performance, leading to better financial results in private companies.
Private market investors increasingly recognize this link, noting that sustainability initiatives, which encompass gender diversity efforts, can boost revenues and exit multiples by around 6-7%, indicating strong financial impacts from ESG engagement.
Although the direct quantitative correlation specifics, such as correlation coefficient values, between ESG engagement, gender diversity, and financial performance in unlisted companies are not explicitly detailed in the publicly available summaries, the joint Bain and EcoVadis analysis confirms that such engagement drives value creation through diverse and sustainable practices.
The study also found that companies with a high ranking for gender diversity in their management teams have an annual revenue growth rate that is about 2 percentage points higher than those with a low ranking. Furthermore, 80% of the companies analysed were unlisted.
Axel Seemann, advisory partner at Bain & Company, stated that ESG engagement should be encouraged in unlisted companies and by investors. The study confirms that positive ESG results are associated with successful companies.
In high-carbon intensity sectors such as natural resources, transportation, and industrial goods, companies that use more renewable energy have higher Ebitda margins. This finding, while not directly related to the Bain-EcoVadis study, further underscores the financial benefits of ESG engagement.
In summary, the Bain-EcoVadis study underscores that unlisted companies with higher ESG engagement, including better gender diversity, tend to achieve superior financial performance, reflecting a strategic business advantage in sustainability.
- The study uncovers a connection between ESG engagement and financial performance, noting that companies with higher ESG scores, particularly those emphasizing gender diversity, can improved financial results, even in unlisted companies.
- Private market investors take notice of the link between ESG engagement and financial gains, stating that sustainability initiatives, including gender diversity efforts, can boost revenues and exit multiples by approximately 6-7%.
- Furthermore, technology-driven solutions within the realm of environmental science could potentially augment the positive impact of ESG engagement on financial performance and revenue growth, continuing to reinforce the strategic business advantage of sustainability.
