Sustainability is good business. A recent report issued by Morgan Stanley Institute for Sustainable Investing found that investing in sustainability has consistently met or exceeded the performance of traditional investments.

Morgan Stanley defines sustainability as a commitment to economic well-being for both the present and the future, balancing society’s needs today with the demands of tomorrow. The definition also encompasses behaviors, processes, tools and technologies that can be perpetuated and replicated in ways that achieve economic, social or environmental benefits.

Sustainable investing is seen as the practice of mobilizing capital to businesses that engage in these behaviors and practices. The performance of sustainable investments in the report is measured in three major areas; individual firm performance, benchmark performance, and investment fund performance.

Two cited studies on individual firm performance both produced results showing that financial markets value firms that incorporate sustainability practices into their operations. The first, a 2014 meta study by Oxford University, assessed 190 academic studies on the relationship between sustainability and firm performance. Individual firms that actively strived for improvements in environmental, social, and governance metrics also showed lower costs of capital and higher operational and stock price performance.

The second, a 2011 Harvard Business School study, found that firms that were high in sustainability significantly outperformed their traditional counterparts. A $1 investment in 1993 in a value-weighted portfolio of high sustainability would have grown to $22.60 by 2010, while a low sustainability portfolio would have only grown to $15.40, a difference of more than 46%.

To measure the performance of sustainable firms relative to industry benchmarks, the MSCI KLD 400 Social Index, an index only including firms that meet rigorous environmental, social, and governance ratings, was compared to the S&P 500 on an annualized basis between 1990 and 2014. The MSCI KLD 400 Social Index achieved an annualized return of 10.14% compared to the 9.69% of the S&P 500. This is a 45 basis point difference and could indicate a positive correlation between firms that invest heavily in sustainability and greater market performance.

Sustainable open-end mutual funds and sustainable Separately Managed Accounts (SMAs) performance was compared to that of their traditional counterparts using publicly-available data from Morningstar. The results concluded favorably that sustainable funds met or exceeded median returns of traditional funds for 64% of the periods examined but less favorably that SMAs met or exceeded traditional median returns for only 36% of the periods examined. Overall, both sustainable funds and SMAs performed favorably compared to their traditional counterparts with respect to volatility.

Download the full Morgan Stanley report here.