Good For the Planet, Good For the Piggy Bank

Saragossa

Good For the Planet, Good For the Piggy Bank

There has been a noticeable rise in the number of firms looking to expand their investment criteria and invest not only in companies that appear financially lucrative, but companies whose values align with theirs and reflect their own stance on important environmental and humanitarian issues.

A July report by Barclays showed that the number of investors who have made some kind of sustainable investment has risen by two thirds since 2015. Millennials are leading the charge, with almost 50% of under 40s having made some kind of investment based on sustainability factors – this is compared to 9% of under 60s and just 3% of over 60s.

In short, sustainability is a far bigger concern among the newest generation of investors than it has ever been before. Total investments with some sort of environmental, social or governance (ESG) consideration grew from $1.4 trillion in 2012 to more than $8 trillion in 2018, and as millennials continue to gain more capital, we can only expect this figure to rise in the coming years.

So what does the rise of impact investing mean for the investment world as a whole?

As sustainable investing becomes more and more popular, more sustainable companies will attract higher and higher levels of investment. And despite initial concerns that such investments may yield lower financial returns, reports indicate that the opposite may in fact be true, and that making investments based on a company’s sustainability profile in addition to its financial portfolio can in fact result in higher returns in the long run.

Companies that have a high ESG rating are demonstrably doing the right things when it comes to operations management and business practices, and that this attracts investors, employees and customers, ultimately bolstering the bottom line.

Although this emerging approach to investment is most definitely exciting, there are still some obstacles that need to be overcome before sustainable investing can truly live up to its full potential. Particularly when making investment decisions based on ESG factors, there is a considerable lack of consistency when it comes to how ratings are determined. As sustainable investing is still relatively new, the exact method for determining a company’s sustainability rating has not yet been properly determined, meaning this rating may differ quite radically depending on which authority is asked to conduct the evaluation.

Different companies collect different data and use it to achieve different results, and this can make it difficult for investors and asset managers to commit to a decision. Although early evidence does seem to indicate that impact investments can be just as lucrative (if not even more so) as other forms of investments, it is impossible to claim this with any real certainty until a higher level of standardisation is achieved in terms of the metrics and terminologies used. However, should things continue on their current trajectory and these creases are ironed out, sustainability appears set to conquer a large portion of the investment space in the next few years.

Saragossa are a talent provider specialising in the Financial Technology, Financial Operations and Data Science sectors. Our role is to match clients with high calibre candidates. Our work encompasses filling temporary contracts along with building permanent teams and resourcing projects. To find out more, please contact enquiries@saragossa.co.uk or call 020 7871 3666.

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