Beyond Returns: Why Good Governance and Responsibility Matter More Than Ever
- Sarah Warner
- Jul 28
- 5 min read
Can doing the right thing also lead to better investment outcomes?
Increasingly, the evidence suggests that it can. Across financial markets, sustainability and governance are no longer peripheral considerations but have become more central to how investors assess risk, resilience, and long-term value.
This shift has been a key driver behind our own journey as a growing discretionary fund manager (DFM) running model portfolio services (MPS), and our recent achievement of B Corp™ certification.
A Milestone That Reflects More Than a Badge
Becoming a B Corp is not simply about meeting a standard, it is about embedding a framework for accountability across every part of a business.
The certification assesses organisations across governance, environmental impact, social responsibility, and transparency. For us, the process required a deep and sometimes challenging review of how we operate: how decisions are made, how we engage with stakeholders, and how we measure success.
Importantly, it reinforced a belief that I have long held since starting in the field of ethical and SRI investing back in 1996, that responsible business practices and good governance are not separate from financial performance, they are in fact integral to it.
What Do We Mean by “Good Governance”?
Governance is often touched upon during discussions of ESG, but not as much as its fellow letters E and S and is frequently reduced to a tick-box exercise. However, it is far more significant. At its core, good governance is about:
• Transparency – clear, honest communication with clients and stakeholders
• Accountability – defined ownership of decisions and outcomes
• Long-term thinking – prioritising sustainable value over short-term gains
• Aligned incentives – ensuring behaviours reflect the interests of clients and society
These principles are not abstract, they directly influence how businesses are run and, ultimately, how they perform.
The Investment Case: Responsibility as a Driver of Performance
A growing body of research supports the link between strong governance, sustainability, and financial outcomes.
A meta-analysis by NYU Stern reviewing more than 1,000 studies found that 58% showed a positive relationship between ESG and financial performance, while only 8% showed a negative relationship (NYU Stern Centre for Sustainable Business, 2021).
This relationship is particularly relevant over longer investment horizons, where ESG factors are significantly more likely to contribute to positive outcomes (NYU Stern Centre for Sustainable Business, 2021).
From an investment perspective, this is intuitive.
Well-governed companies tend to manage risk more effectively. Companies with higher ESG ratings exhibit more stable revenues and cash flows and greater operational efficiency and profitability (MSCI, 2025). They are also associated with lower stock-specific risk and fewer severe drawdowns (MSCI, 2025).
In other words, good governance is not simply about avoiding downside, it is about building more resilient and better-run businesses. The conclusion therefore seems clear: responsible business practices are increasingly a proxy for quality.
From Theory to Practice: A Changing Regulatory Landscape
This shift is not happening in isolation, it is being reinforced by regulation.
In the UK, the Financial Conduct Authority’s Sustainability Disclosure Requirements (SDR) represent a significant step forward in how sustainable investments are defined, marketed, and scrutinised.
The SDR framework introduces:
• An anti-greenwashing rule, requiring all sustainability-related claims to be fair, clear, and not misleading
• Product naming and marketing rules, ensuring that terms such as “sustainable” or “impact” accurately reflect underlying holdings
• Investment labels and disclosures, designed to help investors better understand and compare sustainable products
The aim is clear: to improve trust, protect consumers, and ensure that capital is directed towards genuinely responsible businesses rather than those that simply present themselves as such (FCA).
This aligns closely with broader regulatory expectations, including Consumer Duty, which emphasises transparency, clarity, and acting in clients’ best interests.
As regulatory expectations continue to evolve, frameworks such as B Corp are becoming increasingly relevant within the investment ecosystem. While the FCA's SDR regime does not mandate any particular certification standard, the FCA has referenced B Corp certification within its SDR disclosure examples as an illustration of the types of sustainability criteria that may be used when assessing investments against sustainability objectives. For us, this provides further validation that the governance, transparency and accountability principles embedded within the B Corp framework are not only indicators of responsible business practice, but are also increasingly relevant to how investors, regulators and clients evaluate long-term value and sustainability.
How This Shapes Our Investment Approach
As a DFM, our role is to translate these insights into practical portfolio construction.
This means going beyond surface-level ESG labels and focusing on how companies behave. We assess governance structures, accountability, and alignment between management and shareholders. We look for evidence that sustainability is embedded in strategy, not just communicated in marketing.
It also means recognising that responsible investing is not about blanket exclusions. Instead, it often involves identifying businesses that are well-managed, forward-looking, and capable of adapting to long-term structural changes.
We also have ESG integration across all our portfolios, rather than limiting this wholistic additional risk lens to our Responsible Future Portfolios. In an environment shaped by increasing regulation and scrutiny, this approach is not only prudent, but also necessary.
Why Growing Firms Can Lead the Way
As a developing firm, we believe we have an advantage in this area. Our size enables us to act with clarity and intent, embedding governance principles directly into decision-making. There is clear accountability, close alignment between leadership and values, and an ability to adapt quickly.
B Corp certification formalises this approach, this is no marketing exercise, but a commitment to operating in a way that is consistent, measurable, and transparent.
Looking Ahead: A Structural Shift, not a Trend
The momentum behind responsible investing continues to grow. Around 80% of institutional investors now incorporate ESG considerations into their decision-making, reflecting a clear shift in how capital is allocated. At the same time, regulatory frameworks such as the FCA’s SDR are raising the bar for accountability, transparency, and evidence.
This is not a passing trend, it represents a structural shift in financial markets.
Purpose and Performance Are No Longer Opposites
Our journey to becoming a B Corp reflects a simple belief: businesses can serve their clients, society, and the environment and in doing so, deliver better long-term outcomes.
For investors, governance and responsibility should not be viewed as constraints. They are signals of quality, resilience, and the ability to navigate an increasingly complex world.
And in investing, those are precisely the characteristics that matter most.
References
Ishihara, S. 2025, July 17. Insights on MSCI ESG Ratings and Business Performance. MSCI.
Accessed 2026, July 15 from https://www.msci.com/research-andinsights/paper/insights-on-msci-esg-ratings-and-business-performance
NYU Stern Centre for Sustainable Business. 2021, February 10. New Meta-Analysis From NYU Stern Center for Sustainable Business and Rockefeller Asset Management Finds ESG
Drives Better Financial Performance. NYU Stern. Accessed 2026, July 15 from
