Below are research articles by JUST Capital exploring the connection with just corporate behavior and investor returns. And if you would like weekly updates and insights from JUST Capital, sign up for our newsletter here.

• Introducing the JUST Factor: What explains the market outperformance of JUST companies? Since November 2016 through March 2019, the JUST U.S. Large Cap Diversified Index (JULCD) has returned 37.9%, outperforming the Russell 1000 by 3.3%. To further our overall mission, we want to explore why this is happening, and what some of the contributing causes might be. Enter the JUST factor…
• Better Business, Better Margins: For the past three years, JUST Capital has been building the case that companies generate higher returns when they invest in their workers, protect the environment, treat their customers well, and engage with local communities. The latest installment in our JUST Alpha research series shows that the highest ranked companies not only generated a Return-on-Equity (ROE) 6.4 percentage points higher than their peers, but that they also have higher net and operating margins, and command a meaningful valuation premium over their lower-scoring peers.
• Profit With Purpose: The JUST Index Outperforms on Key Social Issues: More and more, there is a growing call to action for companies to rethink what it means to “do the right thing” – not only by their shareholders, but by their workers, their customers, their communities. The new year and new Rankings also bring an updated JUST U.S. Large Cap Diversified Index (JULCD) with fresh opportunities to look under the hood at the collective performance of the companies now included in the Index, quantifying current performance and providing insight into where corporate America is heading on the issues Americans care about most.Companies in the JULCD Index – again, made up of the top 50% of companies in our Rankings by industry – perform well on the majority of these metrics, and compared with ranked corporations excluded from the Index.
• Looking for Strong Returns? Ask the American People: Analysts searching for the Holy Grail of compelling sources of alpha – active, excess investment return – should look to Main Street America, rather than Wall Street, for guidance. In this paper, JUST Capital analyzes U.S. companies performing best on the priorities of the American public, and finds that these companies cumulatively outperform the Russell 1000, and that 83% of their financial outperformance can be attributed to alpha, not standard investment factors or industry bets. And while it is difficult pin down precisely what is driving this alpha, we cannot ignore the differentiating factor in the companies represented in the JULCD from those excluded: just business behavior.
• The Win-Win of JUST Business Behavior: When it comes to just business behavior, Americans believe that worker pay and well-being should be the top priority for companies. Profits, however, remain an inevitable focus for corporate leaders. Is there a way to strategize a win-win on both of these key priorities? The answer is yes. In this paper, we identify three key actions companies can take to prioritize worker treatment while improving their returns: promote work-life balance, provide career development opportunities, and implement anti-discrimination measures. Regardless of industry, we found that companies prioritizing these three issues consistently generate higher returns-on-equity.
• The Out-of-Sample Alpha of Just Stocks: This new analysis provides evidence that U.S. companies performing best on the priorities of the American public – including worker treatment, fair pay, ethical leadership, and environmental impact – generate significantly greater investment returns and exhibit reduced investment risk than their lower performing counterparts. We’ve found that the top 20% of companies whose business practices most closely aligned with the values of the American public generated 14% higher annualized returns and exhibited 7% lower volatility compared to the bottom 20% of companies analyzed over roughly one year of live trading from Nov. 30, 2016 to Dec. 12, 2017.
• What Drivers of Corporate Responsibility Generate Alpha?: This article examines the investment risk and return characteristics of JUST Capital-ranked stocks, segmented by their JUST scores. The motivation for this study is that the transmission channel(s) for the outperformance of the JUST indexes we found in previous research is not well understood. An original contribution of this article is to not only segment stocks using an overall ESG score, but to also use sub-scores to facilitate a more fine-grained understanding of the aspects of ESG performance that are most impactful to investors, as measured by return and risk metrics. Analysis of the individual elements composing the overall JUST score shows that Leadership & Ethics, as well as Worker Treatment drivers, may provide significant sources of risk mitigation and return enhancement.
• JUST Companies Exhibit Lower Investment Risk: In this report, we examine whether companies that behave more justly are also more resilient to market and earnings risks. We found significant evidence that stocks in the top quintile of JUST scores carry less investment risk than those with lower JUST scores. For instance, top-quintile ranked JUST companies have 18%-22% lower volatility, 6% lower beta, 5% shallower drawdowns, near-half the quarterly earnings-per-share volatility, and 4.5% higher ROIC than bottom-quintile companies. These findings are consistent, though more pronounced in magnitude, than other research from the Environmental, Social, and Governance (ESG) investment community.
• Outperformance of JUST Investable Equity Indexes: Equity indexes based on the leaders of JUST Capital’s 2016 rankings outperform the Russell 1000 index in both absolute and risk-adjusted terms over three to ten years. The indexes are based on the JUST 100 constituents, as well as on the top 50% ranked companies by industry. The 1–4 percentage-point annual outperformance holds over ten years and is robust to three different stock weighting schemes. The indexes have higher Sharpe ratios, similar or better downside risk characteristics, and moderate tracking risk versus the Russell 1000.
• JUSTness Undervalued: The Market Valuation of JUST Companies: We studied the historic and current equity market valuation of the winners of JUST Capital’s 2016 rankings, the JUST 100. Based on more than ten years of average forward price-to-earnings, price-to-book, and forward enterprise value-to-EBITDA ratios, the JUST 100 trade at a small valuation discount to their industry peers. This discount persists as of January 2017. Despite their leading performance on the environmental, social, and governance issues that matter most to the American public — as well as shareholder returns — investors don’t systematically need to pay a valuation premium to own a diversified portfolio of JUST companies. This suggests the market may be undervaluing these increasingly-critical corporate attributes.
• Does company size drive JUST Capital’s ranking?: We studied the company size of the winners of JUST Capital’s 2016 rankings, the JUST 100. In ranking the JUST 100 against their industry peers on revenue, market capitalization, and the number of employees, we found that contrary to many investor’s perceptions, it isn’t only the very largest companies that can “afford” to behave justly. While there is moderate size bias toward larger companies — the JUST 100 on average rank on the 66th percentile of size based on the three measures — the winners in a number of industries were actually below median size. The JUST 100 winners in five out of thirty-two industries (banks, capital markets, energy equipment, healthcare equipment, and commercial services) were smaller than their median industry peers. Details by industry and metric can be found in the full presentation.
• Happy Together: Capital and Labor at JUST Companies: The JUST 100 is the inaugural list of America’s most just companies recently released by JUST Capital. Using the Russell 1000 index of the largest publicly-traded corporations in America as its starting point, these 100 companies constitute the three highest-ranked companies within each of 32 industries, based on JUST Capital’s methodology, as well as the four highest-ranked fourth-place finishers. The JUST rankings reflect the preferences of the American public and place significant emphasis on worker pay & benefits, worker treatment, and leadership & ethics, among other important components. The full rankings and component list can be found on the JUST Capital site.