Sustainability stewardship: Does roundtable on sustainable palm oil certification create shareholder value?

The adoption of sustainability standards is often viewed as a profitability conundrum by palm oil firms and their shareholders. This study examines whether, considering the inherent risk, the Roundtable on Sustainable Palm Oil (RSPO) sustainability initiative creates shareholder value. Based on the panel information of plantation firms listed on the Indonesia and Kuala Lumpur Stock Exchanges, RSPO‐certified firms earned mixed risk‐adjusted performance results relative to non‐RSPO and total palm oil portfolios. They also demonstrated a limited probability for upside growth. Additionally, it is possible that institutionalized sustainability standards do not address all the environmental, social and governance pillars that should constitute sustainable investing. Consequently, business operators and investors seeking improved performance should focus on the fundamentals whilst incorporating sustainability standards.