Khan, Serafeim, and Yoon (2015) examine the value implications of sustainability investments by distinguishing between material and immaterial sustainability issues. They develop a novel dataset by mapping sustainability investments classified as material for each industry into firm-specific performance data on various sustainability issues. Using calendar-time portfolio stock return regressions, they find that firms with strong performance on material sustainability issues significantly outperform firms with poor performance on these issues, suggesting that investments in material sustainability issues are shareholder-value enhancing. In contrast, firms with strong performance on immaterial sustainability issues do not outperform firms with poor performance on these issues, indicating that sustainability investments are at a minimum not value-destroying. Finally, firms with strong performance on material issues and poor performance on immaterial issues perform the best. These results suggest that firms' sustainability investments are efficient, and have implications for asset managers integrating sustainability factors into capital allocation decisions. The study uses MSCI KLD data and maps sustainability issues to materiality guidelines from SASB. They construct materiality and immateriality performance scores for each firm-year and test the shareholder value implications of sustainability investments. They orthogonalize changes in materiality scores with respect to changes in firm size, market-to-book ratio, leverage, profitability, and sector membership. They form portfolios based on the unexplained portion of the materiality score change and estimate Fama and French (1993) calendar-time regressions to test for one-year-ahead abnormal stock return performance of the portfolio. Results indicate that firms with strong performance on material topics outperform firms with poor performance on material topics, consistent with material investments being shareholder value-enhancing. In contrast, firms with strong performance on immaterial sustainability topics do not outperform firms with poor performance on immaterial topics, indicating sustainability investments are at a minimum not shareholder value-destroying. Finally, firms with high materiality scores and concurrently low immateriality scores have the best future stock performance. The study contributes to the literature on the relationship between sustainability and financial performance. It shows that firms can engage in both material and immaterial sustainability issues, and the two actions have different implications for stock prices. Failure to distinguish between the two can produce an insignificant relation between performance on sustainability issues and future financial performance. The results are also likely to be of interest to firms making sustainability investment decisions, and to investors making portfolio allocation decisions based in any part on sustainability criteria. The study finds that sustainability investments in material issues are value-enhancing for shareholders, while investments in immaterial issues have little or no value implications. The results are robust to alternative factor models, different subsamples, and alternative portfolio construction rules. The study also finds that firms with strong performance on material topics exhibit better future changes in accounting performance compared to firms with poor performance on material topics.Khan, Serafeim, and Yoon (2015) examine the value implications of sustainability investments by distinguishing between material and immaterial sustainability issues. They develop a novel dataset by mapping sustainability investments classified as material for each industry into firm-specific performance data on various sustainability issues. Using calendar-time portfolio stock return regressions, they find that firms with strong performance on material sustainability issues significantly outperform firms with poor performance on these issues, suggesting that investments in material sustainability issues are shareholder-value enhancing. In contrast, firms with strong performance on immaterial sustainability issues do not outperform firms with poor performance on these issues, indicating that sustainability investments are at a minimum not value-destroying. Finally, firms with strong performance on material issues and poor performance on immaterial issues perform the best. These results suggest that firms' sustainability investments are efficient, and have implications for asset managers integrating sustainability factors into capital allocation decisions. The study uses MSCI KLD data and maps sustainability issues to materiality guidelines from SASB. They construct materiality and immateriality performance scores for each firm-year and test the shareholder value implications of sustainability investments. They orthogonalize changes in materiality scores with respect to changes in firm size, market-to-book ratio, leverage, profitability, and sector membership. They form portfolios based on the unexplained portion of the materiality score change and estimate Fama and French (1993) calendar-time regressions to test for one-year-ahead abnormal stock return performance of the portfolio. Results indicate that firms with strong performance on material topics outperform firms with poor performance on material topics, consistent with material investments being shareholder value-enhancing. In contrast, firms with strong performance on immaterial sustainability topics do not outperform firms with poor performance on immaterial topics, indicating sustainability investments are at a minimum not shareholder value-destroying. Finally, firms with high materiality scores and concurrently low immateriality scores have the best future stock performance. The study contributes to the literature on the relationship between sustainability and financial performance. It shows that firms can engage in both material and immaterial sustainability issues, and the two actions have different implications for stock prices. Failure to distinguish between the two can produce an insignificant relation between performance on sustainability issues and future financial performance. The results are also likely to be of interest to firms making sustainability investment decisions, and to investors making portfolio allocation decisions based in any part on sustainability criteria. The study finds that sustainability investments in material issues are value-enhancing for shareholders, while investments in immaterial issues have little or no value implications. The results are robust to alternative factor models, different subsamples, and alternative portfolio construction rules. The study also finds that firms with strong performance on material topics exhibit better future changes in accounting performance compared to firms with poor performance on material topics.