Does it matter to be a part of the sustainability index?

We study how companies' sustainability performance affects their future operational and financial performance. Using firms' inclusion in the FTSE4Good index series as an indicator of sustainability performance, a quasi-natural experiment shows that sustainability has a beneficial effect on firms' long-term financial performance. Our findings show a notable rise in the companies' profitability following their addition to the sustainability index. Additionally, companies that are part of the sustainability index are considered to have higher value compared to firms that are not part of a sustainability benchmark.