By all accounts many parts of the business community are now seriously embracing the idea of sustainability. However, we will not be able to make the shift to sustainable growth on a large scale unless the investor community decides that longer term sustainable prosperity is more important than short term profits.
Shareholders clearly have a right to decide the strategic direction of the business that they invest in. So if they push management towards long-term planning for sustainable growth, the company can move in that direction, but if they demand cost-cutting and profit-maximising, company management has little choice but to deliver just that. Hence the reason why there is tension between these two approaches. But there is now reason to think that investors are starting to take a longer term view in their investment practices. These include:
1.Big investment firms are now practising corporate social responsibility and even trying to outdo each other in more sustainable practices, both in their own organisation and in their investing. The United Nations-supported Principles for Responsible Investment, an international network of investors working together to practice responsible investing, is growing fast and now counts 1380 signatories representing 59 trillion dollars in assets under management.
2.Clients, especially millennials, are demanding more from their investments. They want to make money, but they also want to use their wallets to make a difference in the world. Increasingly they are demanding that their retirement funds be managed in a socially responsible way and this has been demonstrated with the number of investment companies now enabling this.
3. More than ever we now have the ability to evaluate environmental, social and governance factors in our investments.
4.There are a number of exciting new startups and high-impact projects in which to invest, including a whole new generation of clean technology, renewable energy, water-saving technology, and “circular economy” projects that ensure waste becomes a new resource, and so much more. Many of these projects are also starting to benefit from the divesting movement away from fossil fuels that drove the old economies.
5. Investors are beginning to call for responsible long-term decision-making by corporate executives, including environmental stewardship and human rights risk management, not only for the greater good but also to ensure the financial health of the companies themselves.
These are just some of the new opportunities and new approaches to sustainable investment that we will start to see over time and with a focus on innovation – anything is possible!