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<p>Do corporate policies for social responsibility help or hurt investors? We examine this long-standing question by analyzing the investment performance of European companies who joined the United Nations Global Compact (UNGC), the world’s most recognized corporate social responsibility initiative. The existing literature presents a clear contradiction: some studies find that CSR commitments like the UNGC create shareholder value through enhanced reputation and risk management, while others argue they destroy value by diverting resources and amounting to little more than "greenwashing." Navigating this conflict, our study provides a comprehensive long-term analysis. We show that a portfolio of UNGC firms does not generate significantly different risk-adjusted returns from a matched portfolio of their non-UNGC competitors over a 15-year period in calendar time. Similarly, using a pseudo-event study methodology centered on a firm’s joining date, abnormal returns for UNGC members are not significantly different from non-members. Our panel regression analyses confirm that UNGC membership has non-significant effects on long-term abnormal returns after controlling for firm financials, governance, and country factors. However, this neutral investment outcome masks a critical operational reality. We find clear evidence that European UNGC firms undergo significant declines in operating performance—specifically in gross profit and return on assets—likely due to the real costs of aligning their operations with CSR principles. This indicates that their commitment is substantive, not merely symbolic. Thus, we conclude that UNGC offers a highly visible, reputable, and efficient means of demonstrating CSR to the world. For European firms and their investors, this comes with a tangible cost to profitability but, crucially,&#xa0;without a commensurate penalty in long-term investment returns.&#xa0;The market appears to efficiently price the benefits and costs of this substantive CSR commitment, allowing firms to "do good" without compromising investor performance.</p>

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Doing good – good for business? The investment performance of European members of the United nations global compact

  • 期刊论文

  • 发表日期：

    2025年12月22日

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  • Alex Ng,
  • Randall Kimmel

摘要

Do corporate policies for social responsibility help or hurt investors? We examine this long-standing question by analyzing the investment performance of European companies who joined the United Nations Global Compact (UNGC), the world’s most recognized corporate social responsibility initiative. The existing literature presents a clear contradiction: some studies find that CSR commitments like the UNGC create shareholder value through enhanced reputation and risk management, while others argue they destroy value by diverting resources and amounting to little more than "greenwashing." Navigating this conflict, our study provides a comprehensive long-term analysis. We show that a portfolio of UNGC firms does not generate significantly different risk-adjusted returns from a matched portfolio of their non-UNGC competitors over a 15-year period in calendar time. Similarly, using a pseudo-event study methodology centered on a firm’s joining date, abnormal returns for UNGC members are not significantly different from non-members. Our panel regression analyses confirm that UNGC membership has non-significant effects on long-term abnormal returns after controlling for firm financials, governance, and country factors. However, this neutral investment outcome masks a critical operational reality. We find clear evidence that European UNGC firms undergo significant declines in operating performance—specifically in gross profit and return on assets—likely due to the real costs of aligning their operations with CSR principles. This indicates that their commitment is substantive, not merely symbolic. Thus, we conclude that UNGC offers a highly visible, reputable, and efficient means of demonstrating CSR to the world. For European firms and their investors, this comes with a tangible cost to profitability but, crucially, without a commensurate penalty in long-term investment returns. The market appears to efficiently price the benefits and costs of this substantive CSR commitment, allowing firms to "do good" without compromising investor performance.