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Deutsche Bank: Prioritising climate change results in share outperformance

Deutsche Bank: Prioritising climate change results in share outperformance

Deutsche Bank debunks the myth that profits fall when addressing climate change in its first report for a new research product suite for corporate clients, highlighting that companies that experience positive sustainability press saw share outperformance of 26%.

Programming their new artificial intelligence platform Alpha-Dig, developed by the bank's Data Innovation Group (dbDIG), Deutsche Bank analysed stock impact and mapped company stock prices after filtering though a staggering five million pages of company announcements released by 1,600 MSCI World companies over the last 20 years, in addition to every Dow Jones news article written.

Climate change and corporates: Past the tipping point with customers and stockmarkets’ explores how organisations that had positive climate change press saw share price outperformance of 1.4% per year over the MSCI World Index, an outperformance of 26%. This also reiterates that small climate change news can make a significant difference.

Bad performance resulted in underperformance; stocks that were most sensitive to deterioration in climate change news include technology, financials and real estate sectors.

The bank also surveyed 1,100 customers in the UK and US and gathered the data to surmise that the historic gap between green purchase intentions and purchase behaviour had shrunk. In the last year, the number of UK customers that purchases products from companies that prioritise climate change has doubled and middle-income groups buy the most climate-friendly products.

While customer boycotts have rarely dented corporate revenue, this is now changing after a third of respondents reveals that they stopped buying a product they liked after bad environmental press on the company.

The report concludes: “The obvious question is whether the recent conflux of climate change prompts in society, such as high-profile documentaries, election results, and a Swedish teenager sailing across the Atlantic, will maintain the attention of customers, investors, and the public at large. History suggests it will.

“Once social movements hit a tipping point, they have proved very difficult to stop. And as government regulation on the issue continues to increase, climate change mitigation will become a normal part of doing business. Customers have spoken, investors have spoken. Those companies that do not listen will certainly be left behind.”

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