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Company & Organisation News - 18/03/2014

Risk premium is sensitive to social responsibility recognition

Three CERAG French academics who used Vigeo’s data received the 2013 SAB trophy for financial sustainability for their work on the social responsibility dimensions that matter for investors.

On the 17th of February 2014 in Lille, the International Observatory of Financial Sustainability (OIFD), SKEMA Business School, Revue Banque Group and SAB Group awarded CERAG academics Isabelle Girerd-Potin (2), Sonia Jimenez-Garcès (3) and Pascal Louvet (2) for their article entitled: «Which dimensions of social responsibility concern financial investors?». This research is based on Vigeo ratings and analysis, partner of CERAG since 2004.

This research deals with links between CSR performance, profitability of financial investments and financial cost of companies. It relies on a sample of 816 companies, rated by Vigeo between December 2003 and December 2010. It highlights three dimensions of companies’ commitments towards their stakeholders:

  • the “direct non-financial” stakeholders (human resources, customers and suppliers, human rights),
  • the “indirect” stakeholders (environment and civil society)
  • and the “financial” stakeholders (governance quality).

 

The authors highlight the fact that investors demand a significantly higher profitability regarding companies for which insurance levels expressed by Vigeo are low, compared to the companies with a more convincing CSR responsibility.

If this phenomenon can be observed from the scores granted by Vigeo on the three CSR dimensions identified by CERAG researchers, they add that the risk premium is clearly more important when it comes to sanction the under-performance towards direct stakeholders (human capital, human rights, customers, suppliers, customers and market ethics).

This dimension is evaluated by Vigeo on 15 criteria dealing with the respect of human rights in the workplace and in society, the respect for freedom of association and the right to collective bargaining, non-discrimination and the promotion of equality , the responsible management of the restructurings, the continuous improvement of working conditions, the respect for customer rights and interests, the prevention of social and environmental dumping in the supply chain and in purchasing, and the prevention of corruption.

 

(1) CERAG : French Applied Research Centre on Management of Pierre Mendès France University in Grenoble
(2) Isabelle Girerd-Potin and Pascal Louvet are both finance teachers at IAE Grenoble and investigators at CERAG laboratory.
(3) Sonia Jimenez-Garcès is a finance teacher at Lumière Lyon 2 University and investigator at CoActis laboratory.
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Keywords : ESG, World