Investors continue to debate whether environmental, social and governance (ESG) factors can be used to identify companies that outperform the average.

In this paper, Osmosis Investment Management analyse the relationship between corporate sustainability practices and earnings surprise to investigate whether companies pursuing more environmentally friendly business models are more likely to report earnings that exceed market expectations. If it can be shown that sustainability contributes to beating estimates, it would provide an important link between corporate environmental impact and stock price performance, and therefore justify the use of sustainability as a component in the investment process.

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