Why am I bullish about ESG?

When VCs interact with Founders, one common question they ask is “where else have you seen this work? Is there a global example, or validation of such a business?”. As sustainability and ESG topics are becoming the rage, and multiple consultants and saas providers are lining up, I attempt to address the same question - “where else has ESG / sustainability taken off?”.

The short answer is - the EU is the frontrunner in all matters related to UNSD Goals, or ESG. Overall developed markets (including US, UK, Australia) are surely showing some interest, but with a lesser level of intensity, as compared to the EU. So, there is certainly a global validation that “ESG / Sustainability” needs exist in the market.

Let me elaborate, taking into consideration different types of stakeholders. You could say this is my thesis around “Why am I bullish about ESG”.

Customers:- There is a reason I am starting with end customers (and not the Government, which is the usual suspect in such matters). The point I am trying to drive home is… this is not merely a compliance activity enforced by regulatory action. The end customers are worried about a sustainable planet, they are demanding better products and services from the businesses, and are willing to pay for it.?

A dear friend of mine, Rajeev Sinha , was exporting clothes and apparel to the EU c. 2017. Even back in those days, he mentioned that the customers in EU care about “sustainably sourced” products; he had seen brands selling 2 different heaps…one which was certified to be sustainably sourced, and the other had no such claim; significant proportion of customers went for the “sustainably sourced” products, and were willing to pay a premium for it.?

In a recent conversation with another friend Riju Ray , he mentioned that his family is trying to cut down on meat consumption after realizing the carbon foot-print implications. He has not gone full vegan yet, but the change in consumer preference - not due to personal taste or health-related choices, but to environmental considerations - was, frankly, shocking.?

If you don’t want to look at anecdotal evidence, let’s discuss industry reports.?

Unilever achieved fantastic earnings growth through its ‘Sustainable Living Brands ’ portfolio. These brands embodied a strong social and environmental purpose.

In Real Estate (which, by the way, contributes to 40% of global carbon emissions ), customers are willing to pay a premium for Green Buildings , as per CBRE. There is a similar report by JLL that talks about customers in Asia-Pacific willing to pay a premium rent for green real estate .?

Forget other markets; Indian consumers are willing to pay a premium of 20%, for sustainable products. ?

In case you still don’t get it, world over, consumers have shown an interest in products and services that are more sustainable; and the same trend seems to be catching up in India too.

{This was the first part in my series of posts around “Why am I bullish about ESG?”. In the next part , I will talk about investors and lenders }