By Rachna Kango - Published September 10, 2023
Full interview available on Sustainability Magazine
When it comes to sustainable investing, it's essential to understand what exactly Sustainable Development Goals (SDG) and ESG are, their relation and the variable impact between the two. The United Nations member states adopted 17 SDGs in 2015, designed as a "blueprint to achieve a better and more sustainable future for all". These SDGs are intended to be accomplished by 2030. In this endeavour, ESG provides a framework for corporations to achieve their sustainability goals.
How ESGs promotes sustainable investment
According to a Deloitte survey on millennial buying patterns, 42% of this generation would be more likely to stick with a company if they thought it positively impacted society. Companies that are not ESG-friendly may suffer as millennials surpass baby boomers as the most significant spending demographic. Over time, methods for incorporating ESG principles into the investing process have changed. Although early ethic-based approaches like negative screening are still applicable today, many other new tactics can be included.
ESG investing is thus an investment strategy that creates a framework for business, social and environmental risks. A well-thought ESG investment includes the following factors:
Aligning SDG with company values
Companies choose different SDGs aligned with their company values based on several factors. Here's how companies typically approach the selection of SDGs:
Benefits offered by ESG investing
The market share of ESG investing has been continuously increasing for decades, so it's not just a passing fad. A third of the total global assets under management are currently anticipated to be made up of ESG assets, valued at US$4t.
This industry is only anticipated to expand as worries about social injustice, climate change and governance practices become more mainstream. In addition to being better for the environment and our communities, the ESG investment strategy has demonstrated outstanding long-term growth in return. Additionally, it is more durable during market downturns than other stocks.
Similarly, investor risks, like the long-term effects of climate change on enterprises, can be reduced with the aid of ESG investment. More systemic risk reporting openness is required as ESG investments become more popular. Institutional investors and advisors now have access to the knowledge they need to make wiser investment choices and suggestions.
Integrating ESG principles and supporting the SDGs provides companies with several benefits, including enhanced brand reputation, improved risk management, access to capital, increased operational efficiency, attraction and retention of talent, and long-term business resilience.
Furthermore, aligning business strategies with the SDGs helps companies contribute to global sustainability and social progress, fostering a more inclusive and prosperous future.