Sustainable investing is a growing trend with assets in the sector totaling nearly $31 trillion in the five major markets globally at the beginning of 2018. This number represents a 34% increase from 2016. Professionally managed assets in environmentally responsible and sustainable sectors now range from 18% in Japan to as high as 63% in Australia and New Zealand. These numbers show that sustainable investing will only continue to increase as investors realize there is money to be made through responsible investing.
It was inevitable that the financial markets would have to get onboard with sustainability initiatives in order for aggressive renewable energy and environmentally friendly projects to flourish. Few organizations can afford to fund these projects out of pocket and investors are beginning to realize not only profits, but also pride in doing the “right thing.”
This doesn’t mean that there isn’t much more to do. By 2050 there will be 9 billion people on the planet and if we are to live well every company and industry must be on board. With this must come honesty about how long the transition to a renewable and sustainable world will be and at what cost. Hundreds of years ago sustainable living was simple the way one lived. With the majority of the world’s population living in cities and natural environments dwindling, this is no longer the case.
Even though the numbers show that there are huge returns to be made by investing sustainably the sector isn’t growing as fast as it should, considering the pace of the renewable energy sector itself.
Because the industry in general pretty much does everything it can to avoid using the actual word “sustainability”, many investors don’t even understand what it means. Investment houses use terms such as, responsible, green, ES, multi-capital, integrated, non-financial, pre-financial, extra-financial, intangible, impact investing, impact valuation, SRI, stewardship, etc.
As someone in the renewable energy industry, I have to wonder if they are afraid that using the word will upset proponents of fossil fuels. They should be more concerned with renewable energy investors as this is the fastest growing industry on the planet at present.
The main focus one must take when introducing an investor to sustainable investing is to focus mostly on the returns, not the fact that it is the responsible thing to do. Investors that are environmentally conscious will not have to be sold on it.
Some business leaders and investors have the idea that they have to give up something in order to be a responsible investor, but this is not the case.
Industry publications have shown time and time again that there is a direct correlation between responsible investing and positive corporate financial performance which includes increased share price and lower operating costs. These facts are proven in a recent Harvard Business Review article, and a BNP Paribas opinion piece.
The bottom is sustainable investing is good business, regardless whether you are a tree hugging, EV driving vegan, and most investors aren’t. Sustainability is what kept this planet and its occupants healthy for thousands of years after the arrival of humans on the scene. If you want your business to last for generations, it is crucial.