Companies have realised the impact environmental issues and green business models have on the bottom line, but investors are yet to reach the same level of understanding and could take years to catch up.

That is the view of Christopher Greenwald, head of sustainability application and operations at Swiss-based Sustainable Asset Management (SAM), who yesterday told reporters at a briefing in London that investors rarely shared companies’ long-term approach to sustainability issues.

“Companies are 15 to 20 years ahead of investors in terms of understanding the impact of sustainability on their business performance and financial returns,” Greenwald said. “Investors are about where companies were in 1995 when sustainability reporting was just getting off the ground.”

He said many companies have moved beyond sustainability reporting and are integrating sustainability into their strategic goals, product strategies, overall metrics, and the way they think about improving their own business performance. But Greenwald added adoption of greener business models would need to reach a “critical mass” before impacting investors.

“You had about 50 companies in the mid-90s producing some kinds of environmental or social report - now you have over 4,000, and that number has been growing year over year,” he said.

“You have to have a critical mass for the investors to wake up and get their attention. We’ve got that over the last few years but I think it’ll take some time for investors to catch up to companies in terms of the way they think about how sustainability can impact returns and realise financial gains over time.”

SAM provides the data for the Dow Jones Sustainability Indexes (DJSI), which ranks over 340 companies by sector on their performance across economic, environmental, and social metrics.

The number of companies submitting data to be part of the index reached 800 in the last year, and Greenwald partially attributed the rise to an increased focus on sustainability caused by the financial crisis, which he said could start to shrink the gap between how much weight it is given by companies and investors.

“People got burned by relying on financial numbers alone and I think there’s a general recognition that measuring management quality is key for any kind of long-term investment performance,” he said.

“It’s probably the most important factor in determining a company’s long-term valuation. Sustainability analysis provides a way of systematically measuring management quality and getting a quantitative figure that’s objective… as opposed to just relying on a feeling on whether the company is well or poorly managed.”

However, John Prestbo, executive director of Dow Jones Indexes, cast doubt on whether sustainability would reach the mainstream investment community in his lifetime, blaming the “mismatch” between long-term thinking and the “attention deficient disorder stock market”.

He also suggested a generation of asset managers who could not be taught sustainability’s “new tricks” would need to be replaced.

“The growth is there, the trend is there, but it’s slow - it takes time for people to adjust their way of thinking,” he said.

“I think the current generation of asset owners and managers has to move on and make way for a younger group that has sensitivity to these kinds of considerations. So it’s going to take time as they pass from the scene and newer asset owners and managers take their place that do have their sensitivities attuned.”