25 Reasons Sustainable Investing Makes Economic Sense

As investors and asset managers are becoming increasingly interested in investing in companies and funds that align with their personal values and beliefs, “sustainable” investing subsequently is gaining in popularity. As the prominence of ESG has grown as a focal point for investors, the issue has become politicized, and there is a misplaced belief that asset managers face a choice of investing their principles or having higher returns on a portfolio.

Instead of delving into the politics of ESG and sustainable investment strategies, we wish to focus on the very real economic reasons that support the integration of these principles into business and investment decisions. Here are 25 short reasons that ESG-focused investment strategies can build returns and lower risk:

1. Avoid potential reputational damage and the high cost of responding to negative publicity due to perceived social and environmental irresponsibility
2. Benefit from the “first-mover advantage” associated with being an early adopter of sustainable business practices
3. Anticipate and adapt proactively and more cost-effectively to changing regulations related to social and environmental issues
4. Meet the expectations of employees, customers, and other stakeholders who increasingly value long-term investment strategies that focus on sustainability
5. Tap into new markets and expand customer bases by catering to the growing demand for sustainable products and services
6. Increase innovation and creativity by reevaluating traditional business practices to address social and environmental concerns
7. Reduce costs associated with waste, pollution, stranded assets, and resource depletion
8. Hedge against volatile commodity prices by diversifying supply chains and investing in renewable resources
9. Build brand loyalty and customer trust by demonstrating a commitment to long-term stewardship practices
10. Create shareholder value by reducing risk and maximizing opportunities associated with social and environmental trends
11. Respond to employee, customer, and other stakeholder expectations
12. Attract and retain the best employees, who increasingly want to work for companies that prioritize sustainability
13. Improve employee productivity and engagement
14. Mitigate risk by identifying environmental and social issues early
15. Take advantage of opportunities generated by broad economic transition generated by environmental concerns
16. Build trust with shareholders
17. Outperform peers over the long term
18. Attract more and more investors who have sustainability as an expectation
19. Access new sources of capital as traditional investors shift their portfolios towards sustainability
20. Avoid excessive scrutiny from regulatory agencies
21. Meet sustainability goals being set by governments around the world
22. Mitigate climate change risks
23. Adapt to climate change impacts
24. Preserve and protect resources that are increasing in scarcity, but vital to civilization, like water
25. Save money in general by using less and re-using more

Sustainability is about making the right strategic choices for staying ahead over the long-term. By integrating sustainability into business practices, companies can avoid potential risks, seize new opportunities, and create shareholder value.

Conclusion

ESG investing is about more than just making the world a better place; it’s also about making smart investment choices. By considering factors — such as a company’s environmental impact or governance practices — investors can identify risks and opportunities that may not be immediately apparent from financial statements. ESG investing makes sense for anyone who wants to make money and make a difference.