Corporate leaders consistently mention their frustration that investment professionals rarely, if ever, ask questions about sustainability during quarterly analyst calls. While there may be a great deal of sustainability data out there, evidence that sustainability strategies are material to a company’s reported financial performance is hard to find. As a result, the vast majority do not typically factor sustainability data into their analyses of company performance or portfolio decision-making.

Socially responsible investing remains mostly rooted in important engagement and advocacy practices. Only about 10% of the $13.6tn (8.2tn) deployed with sustainability issues in mind actually involves making primary portfolio decisions using ESG or sustainability performance data.

This roughly $1.5tn in portfolios under management represents 1% of the total value of global managed assets, or less than 5% of the value of the aggregated assets of the Principles for Responsible Investment signatories. Perhaps the other 99% are waiting for clearer signals regarding what many believe to be the growing business value of sustainability. There’s an important gap between investors and companies – one that may unwittingly slow progress toward a more sustainable future.

However, there is a solution to bridge this gap. It begins with an effort to communicate the business value of sustainability in terms investors already understand: the potential to drive revenue growth from sustainability-advantaged products, improve productivity (and margins) from sustainability initiatives and measurably reduce key sustainability-related risks to revenue and reputation.

Understanding how effectively a business is exploiting the new global force in business in simple terms may be a key indicator that every analyst needs to know. Many public and privately-held companies are reporting results of their sustainability efforts along these lines in what has been called a value driver model.

Sustainable growth in action

In 2012, DuPont generated more than $10bn from environmentally advantaged products that are based on non-depletable resources or reduce GHG emissions and claims to save approximately $300m per year from energy efficiency initiatives.

Pirelli reports 45% (or €2.84bn) of their €6.3bn 2012 total revenue comesfrom their green performance products, up from 36% in 2010. Their rice husk silica innovations will significantly lower their materials costs while improving the sustainability performance of both their products and the company.

GM earns $1bn a year turning waste into revenue – an important part of their turnaround plan which generated a total of $1.6bn in operating income in 2012.

While at Boeing, with the size of the global fleet expected to double in the next 20 years (not counting the 87% that will be retired) and fuel accounting for as much as 40% of airline operating costs, it’s no surprise that its super efficient 787 has built the fastest growing order book in aviation history (despite some hiccups ). The company is positioned to be a growth leader by helping its customers reduce cost as well as risks from GHG emissions.

Praxair saves more than $100m per year in sustainability-driven productivity savings through aggregating benefits from thousands of closely managed projects, yielding more than 4% improvement in their annual operating income.

Philips earned 45% of its more than $24bn 2012 revenue from sustainability-advantaged products, and has a long-term term goal of 100% as it continues to evolve its position as the leader in new ultra-efficient lighting technologies and healthcare innovations that benefit the company and society.

Growth rates of sustainability-advantaged revenue in the companies we have recently studied can exceed overall revenue growth by anywhere from double to over 50 times, demonstrating the speed at which companies are actively transforming their businesses.

Evolution of the business model

The examples above are all from companies that have been around for a long time, but are now evolving their businesses to capture tangible value and opportunity from sustainability, and all measurable in the dollars that most analysts, fund managers and asset owners can easily understand.

Not all companies are pursuing sustainability strategies that have the potential to drive significant short and long-term financial gain. We are releasing a series of case studies along with the UN Global Compact and Principles for Responsible Investment teams, which we are presenting in conjunction with the upcoming Leaders Summit events in New York next week.

By measuring and forecasting in this fashion, companies have the opportunity to demonstrate how they stand out from the competition and how they are positioned to win in a fast-changing future. Early evidence suggests the financial performance of these sustainability innovators has been strong over the past few years.

Analysts can start seeing the specific incremental business value from environmental and social strategies through this lens, and measure progress. For example, when companies tell investors that one aspect of their business accounted for 15% of total revenue and is growing at five times the rate of the company overall, we think there will be questions – even for those not getting results.

No analyst or company should want to be left behind – and if we can help to improve communication – there’s a big opportunity for both.

Cary Krosinsky is director of the Network for Sustainable Financial Markets. He is co-editor of Evolutions in Sustainable Investing, and a founder and director of the Carbon Tracker Initiative. David A. Lubin serves as managing director of Sustainability Shareholder Services. He previously was founder and chairman of Renaissance Solutions

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