Sustainable investing companies live up to expectations in generating long-term value while also having a significant impact in addressing environmental, social, and governance issues. In return, they are increasingly attracting huge capital inflows; ESG has become a central theme in the investment world.
Companies and individuals acknowledging corporate and investment behavior can impact the society and environment have been the catalyst fuelling impact investing. With the focus increasingly shifting towards green investing, sustainable investing funds are also increasingly cropping up as they look to take advantage of sustainable investing’s huge market opportunity.
Likewise, sustainably managed assets are on the rise, driven by changing consumer demands and an influx in sustainable investing funds. The spike in sustainably managed assets is a clear indication that investors are increasingly coming to terms with the fact that sustainable investing is a clear win and has the potential to create long-term value.
Sustainable investing companies are establishing long-term value in various ways.
Exposure to Untapped Markets
Sustainable investing companies are increasingly tapping into new markets that traditional investments failed to tap into despite tremendous growth opportunities up for grabs. Increased focus in emerging segments such as clean energy and affordable housing has helped such companies take advantage of enormous opportunities that will last for decades conversely and generate long-term value.
Given that such ESG-focused firms invest in projects and sectors that have the potential of addressing underlying ESG issues, they are always likely to get access approvals and licenses much easier than other firms.
The payoffs on sustainable investments are also real and almost instant.
“Consider when Unilever unveiled a dishwashing liquid that consumed much less water than other brands. Sales for the new product outpaced other brands’ growing by more than 20%, conversely generating more value expected to last for years to come,” said Ekaterina Chernova, The Altruist League’s Managing Partner.
Significant cost reductions
The impact of any long-term investment will be felt when there are significant cost reductions. For this reason, sustainable investing funds are only investing in projects and programs that have the lowest costs.
It’s become increasingly clear that there is a significant correlation between resource efficiency and financial performance. Therefore, by keeping operational costs low, sustainable investing companies have generated substantial returns, which can only translate to more long-term value.
Sustainable investing companies are best known for executing ESG effectively, conversely helping avert a spike in operating expenses which many research firms affirm affect operating profits thus long-term value.
Avoiding Intense Regulatory Scrutiny and Interventions
Reputable Sustainable investing companies are known to adhere to the precepts of environmental, social, and governance protections. The fact that these companies focus their resources and investments on protecting the environment and society while also pursuing financial returns sees them attract the least regulatory scrutiny.
Regulatory scrutiny and interventions can be a costly affair, given the fines that come into play most of the time. Focusing on ESG allows green investing companies to avoid the risk of adverse government action. In return, they can enjoy government support in tax incentives and grants that go in growing long-term value.
According to The Altruist League’s President,Milos Maricic, “One-third of corporate profits is a great risk owing to state interventions. Likewise, the strength in ESG is helping reduce companies’ risk of adverse government action conversely concentrates on generating long-term value.
These companies can avoid such scrutiny or fines, allowing them to generate optimum returns, therefore, more long-term value.
Investing in ESG Causes
Sustainable investing companies are also establishing long-term value by investing in projects and programs that impact the environment and the human race outright. For instance, ESG funds are increasingly turning their investments and capital into green energy projects.
Solar and wind projects are attracting huge capital investments from sustainable investing funds. While the firms are positioning themselves for the financial returns as demand for green energy skyrockets, they also stand to positively impact the environment by helping reduce reliance on fossil fuels.
Solar and wind projects will serve the human race for decades, providing an opportunity for such companies to generate long-term value while positively impacting the environment. Similarly, strong ESG propositions are known to enhance investment returns on allocating capital to promising sustainable investments.