Recently graduate students from Columbia University SIPA participated in a Capstone research project in collaboration with CSRHub. The purpose of this project was to further explore the relationship between perceived corporate sustainability performance and operational performance, represented by cost of debt. Through use of a set of corporate social responsibility factors from the CSRHub database and data on the cost of corporate debt from the Bloomberg database, the Capstone team was able to investigate the relationship between the two. The team found that CSRHub’s 12-subcategory model for sustainability explained 9.3% of the variance in the cost of debt, or an estimated $343.4 billion in interest expenses for a group of 1,625 companies.
“The sustainability factors that had the most effect on debt varied by industry category and for those companies that had higher interest rates compared to those with lower ones. In general, better Board and Compensation & Benefits scores decreased debt cost. Strong Product and Energy & Climate Change scores can potentially enable companies with higher cost of debt to decrease their interest expenses. Companies with average and below average cost of debt in service and heavy industries benefited from strong Environmental Policy & Reporting and Resource Management practices, while those in light industries were helped by stronger Human Rights & Supply Chain performance.”
To see the outcome of the group’s research, click here or download below.
CSRHub provides access to corporate social responsibility and sustainability ratings and information on 15,000+ companies from 135 industries in 132 countries. By using the world’s most comprehensive CSR metrics database and analysis tools, managers, researchers and activists can benchmark company performance, learn how stakeholders evaluate company CSR practices and improve a company’s sustainability.