06-09-2026
For more than a decade, there has been a growing interest in material, sector-specific sustainability disclosure from companies. At the same time, investors are working to validate their sustainability models, which may help improve risk-adjusted investment returns in an evolving economy, particularly over the long term.
Companies have responded with over 98% of large-cap companies in the S&P 500 publishing sustainability reports in 2022, according to the Governance and Accountability Institute. This type of reporting has been standardized for both companies and investors by the International Sustainability Standards Board (ISSB), which is an independent standard-setting body within the IFRS Foundation (International Foundation for Reporting Standards).
The materiality of sustainability to different sectors or regions is a key consideration. Climate, for example, is very local. Heat stress and drought vulnerability may matter more to one municipal region while rain deluges and flooding impact others. The same is true for businesses, where mispriced intangibles or externalities specific to a sector may cost future generations of shareholders or creditors.
Founded in 2011, the Sustainability Accounting Standards Board (SASB) collaborated with industries and investors to codify sector-specific, decision-useful sustainability disclosure standards across 77 industries.
In addition to investment management, sustainable finance enhances long careers in investment banking, where capital formation begins. If invested capital mobilizes long-term value creation, then it stands to reason that access to capital may improve alongside sustainable business practices.
One practical approach to understanding this concept is to start by studying the $4 trillion U.S. municipal bond market. This remarkable market is made up of approximately 40,000 different bond issuers, and it’s where we raise the capital to finance most of the nation’s essential public infrastructure. State and local governments are responsible for close to 80% of the country’s public infrastructure spending according to a 2025 Brookings Institution report. States, cities, towns, schools, utilities, libraries, public transportation, toll roads, hospitals, affordable housing and so on all have the authority to issue municipal bonds to finance their capital projects. This market touches our lives every day.
Running a municipality is a very capital-intensive business and the duration of capital commitments is comparatively long. This is because public works can be huge and can function for generations. Accordingly, public finance, the investment banking term for the municipal bond market, has a powerful incentive to follow sustainable business practices, including improved disclosure to investors of material sustainability factors.
It’s noteworthy that the tax advantages of most municipal bonds require well-defined disclosure on the use of bond proceeds. This required disclosure is relatively distinct to the municipal bond market and helpful for investors. The first question municipal bond investors often ask is, "What are they using the money for?” This is because the essentiality of the project being financed is a credit consideration. For example, municipal bonds issued to finance clean drinking water are considered to offer reliable future cash flows due to the essentiality and economic benefits of clean water. The essentiality of the public benefit may lower the cost of capital.
Although this perspective seems uniquely aligned with municipal finance, it can be a good standard for corporate finance as well. For example, are companies borrowing to invest in capital projects or to pay dividends to shareholders? And under which of those scenarios is the organization creating long-term value?
Of course, local governments aren’t alone in serving a public benefit. Justifiably, most organizations would insist they serve a public benefit. Some companies go a step further and are organized as benefit corporations, or B-Corps, where board governance must consider the impact of their decisions on a broad set of stakeholders such as employees, customers and communities. This contrasts with the existing and strong standard of shareholder primacy. B-Corps often have more flexibility to avoid short-term pressures, allowing management and the board to stay focused on longer-term value creation.
Sustainable investing encourages investors to raise their sightlines and take a more holistic and long-term view of how companies and governments will function in the future, particularly in the face of large-scale issues such as population change, the changing climate and technological impacts. As such, professionals may benefit by understanding the connection between sustainability, financial performance and long-term value creation in the modern economy.
Tim Coffin is a Daniels School Business Fellow. A retired director of Breckinridge Capital Advisors, Coffin helped launch the firm’s institutional channel serving nonprofit and mission-driven investors. He previously held leadership roles at Fidelity Investments and Corby Capital Markets, including president. Coffin is a frequent speaker on sustainable investing and has served in advisory roles with the Brookings Institution, the Journal of Impact and ESG Investing and the Intentional Endowment Network.
