Family businesses fall behind non-family companies on ESG and lose their trust premium

Listed family businesses are lagging behind their non-family business counterparts when it comes to their Environmental, Social, and Governance (ESG) risk profile and losing their “trust premium” as a result. These are the findings of a major study by Family Capital, supported by the ESG risk assessment analysis from PwC.  

The research looked at the ESG risk profile of the top 100 listed family businesses from Family Capital’s annual ranking of the top 750 Family Businesses in the World. It compared them with the profile of the top 100 non-family listed businesses in the global Fortune 500 ranking. (see methodology below). For further insights, the research also looked at the stock market performance of these companies. 

The ESG risk profile ranked all the businesses in the survey on a scale between one and 10, with one being the least risks and ten the highest in each of the ESG categories, which makes up the overall score 

The findings are striking as the top 100 listed family businesses had a total score of 4.65, compared with the non-family business corporates with a score of 3.75.  A difference of 0.9, representing a difference of one entire rating category on an overall basis (see Chart 1 below). 

Not only did family businesses rate worse than their non-family counterparts in the overall score, but they rated below in the three individual areas of ESG. This was particularly the case for environmental risk, where family businesses had an aggregate score of 4.02, compared with a much better 1.64 score for their non-family counterparts. (See Chart 2 and 3 for the individual rankings of the top 100 listed family businesses.)


Source: ESG risk assessment analysis from PwC Luxembourg



Source: ESG risk assessment analysis from PwC Luxembourg


Source: ESG risk assessment analysis from PwC Luxembourg

“The data supports our PwC Global Family Business Survey findings,” says Peter Englisch, global family business leader at PwC. “Today all businesses need to make ESG a business priority and need to improve their efforts and transparency on relevant non-financial indicators.”

He added: “Sustainability and positive social impact has always been part of the DNA of all family businesses and we need them to manage the challenges of the future. But it´s time to act now.”  

Investors’ confidence and stock price development 

This is no abstract issue for listed family businesses as their ESG deficit might affect how investors perceive them. 

Our research also looked at the market capitalisation performance of the index of the top 100 listed family businesses in our survey and compared them with the top 100 non-family businesses on the global Fortune 500. What we found was the “trust premium” – outperforming their non-family business counterparts – listed family businesses had in earlier years started to fall off in 2015, and became negative in March 2020. (see Chart below)

Of course, whether this is because institutional and retail investors are marking down family businesses because of their higher ESG risk profiles isn’t clear from our research. But we found that those companies with a good ESG risk profile perform better on the stock market compared to those with a bad ESG rating as shown in the Chart below. 

Given the lack of information on non-listed family businesses, research on their ESG risk profiles wasn’t possible. But it wouldn’t be too far off the mark to assume privately controlled family businesses aren’t any better in terms of their ESG risk profile than their listed equivalents. After all, non-listed companies don’t face the same ESG pressure as listed businesses regarding transparency in these areas. 

Action Needed 

At the very least, the study calls for family businesses to do more when it comes to their ESG efforts, especially when these considerations are more important than ever. It also suggests the premium attached to family businesses because of their commitment to long-term objectives and stakeholder values might need to be reassessed in an age where ESG commitments are more important than ever. 



Family Capital worked with PwC Luxembourg, which has developed an ESG Risk Assessment tool that highlights and quantifies the ESG risks for companies. 

The PwC tool follows The Sustainability Accounting Standards Board (SASB) Materiality Map, which identifies sustainability issues that are likely to affect companies’ financial condition or operating performance within an industry. 

The material sustainability issues per industry are mapped to specific ESG indicators/data provided by an external ESG data vendor. Then, based on the availability of the relevant ESG data, the tool calculates the ESG Risk Score.

The ESG Risk Scores for each company is based on the relevant ESG indicators that are mapped to the material dimensions (E, S & G) according to the industry classification of each company. 

The ESG risks could arise from the lack of transparency from the company; it does not mean that the company is performing better or worse than others in terms of ESG. Instead, it means that the company is facing risks for not considering the relevant and material ESG aspects for their industry.

The data for the stock market indices charts we looked at the market capitalization of these companies and indexed them. However, to provide a fair picture we have excluded from the calculation those companies that were not listed during the entire period.


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