Does the ESG performance affect the portfolio strategy?

The paper attempts to answer the following question: can the pursuit of certain ESG performance standards influence the portfolio strategy choices of corporate headquarters in the same way as typical business logic? In the paper, through the analysis of the Sustainability reporting of major tobacco companies, the “relationship” between the type of ESG performance that the main standard setters and rating agencies recommend, and the investment choices made by companies is studied. To achieve this objective, after constructing the conceptual framework, case studies were analyzed. Subject of the analysis were the five major companies belonging to the tobacco industry. The result was that senior management’s desire to achieve certain levels of ESG performance influenced the portfolio strategy choices of corporate headquarters. To provide a managerial tool with which to identify the positioning of a business with respect to sustainability issues, the paper proposes a matrix to formalize what can be called ESG logic. By reading the text, managers can draw useful indications on how best to approach the creation of an ESG strategy, through investment/disinvestment choices from a business or through sustainability-oriented business model innovation processes. In this way, they will have a broader and more structured view on where to focus their attention, to make investments in sustainability a source of lasting competitive advantage.