Deutsche Bank scoured 5 million pages of news and found that positive climate-change coverage helped stocks beat the market. Here's how that could shape the future.

  • Deutsche Bank research quantified the impact company’s press and announcements around climate change had on share prices over time.
  • The firm found that companies that received positive coverage around climate change outperformed the MSCI World Index benchmark by 1.4 percentage points per year.
  • The team went on to project that assets under management for funds with an environmental, social, and governance mandate will hit 95% by 2030.
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As climate change is thrust further into the mainstream discourse, the heat is being turned up on corporations that employ less-than-stellar environmental practices.

Consumers are increasingly pushing back on non-eco-friendly procedures, and their shifting attitudes are starting to impact the stock prices of companies that do prioritize the environment.

In order to quantify the impact this shift has had on stock performance,Deutsche Bank tapped into their artificial intelligence platform, α-DIG. The firm investigated more than 5 million pages of press incorporating over 1,600 MSCI World companies, spanning the last 2 decades.

Deutsche Bank ultimately arrived at a clear conclusion: caring about the environment is good for business.

“Companies that experienced positive press and announcements on climate change saw share price outperformance of 1.4 percentage points per year over the MSCI World Index — outperformance of 26%,” the firm’s research team said in a recent client note. “Conversely, bad press results in underperformance.”

These findings are upheld and enhanced by the chart below, which splits Deutsche Bank’s universe into two distinct subsets. The black line reflects the relative outperformance of the companies that relayed the most positive climate-change news versus the MSCI World Index. That translates into a compound annual growth rate of 6.4%, versus 5.6% for the index.

Meanwhile, the blue line shows the companies that have seen the largest improvements in the portion of positive climate-change news, regardless of how bad it was to start with. Their outperformance is even more pronounced: they’ve beaten the MSCI World gauge by 35%.

The takeaway here is that it’s not too late for companies to start making strides as it pertains to ESG. And once they do, history suggests their share prices will benefit.

Deutsche Bank α-DIG

Further, Deutsche Bank has projected the amount of global capital falling under an environmental, social, and governance decree to grow to 95% of AUM by 2030. That means investors who ignore this trend will have to do so at their own peril.

“Given the increasing pool of investors who pick stocks based on a company’s environmental, social, and governance traits, it seems certain that positive and negative share price effects seen in the last section will amplify themselves in the future,” Deutsche Bank said.

Deutsche Bank, Global Sustainable Investment Alliance

The two charts deliver an unmistakable conclusion: the tide is shifting in favor of ESG-focused companies. And both companies and the investors who buy their stocks are being rewarded.

It’s setting up a future where ESG adherence could make a crucial difference to a corporation’s future, and also investor portfolios across the market.

“Once social movements hit a tipping point, they have proved very difficult to stop,” Deutsche Bank concluded. “Customers have spoken, investors have spoken. Those companies that do not listen will certainly be left behind.”

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