What is Sustainable Investment?
The term “sustainable investment” is currently in vogue. Due to rising investor awareness of the problems, as well as the opportunities and risks, associated with sustainability, the word has become more popular in recent years. Investors have started concentrating more on the businesses that perform well on the sustainability metrics.
Due to a number of factors, such as the development of new technologies and the entry of new businesses into the sustainable business sector, it appears that the moment is right for sustainable investment in India. This has also allayed the worry that making certain earnings sacrifices in the name of ESG has.
According to experts, the main purpose of sustainable investing is to match narrow financial goals with more general societal and environmental objectives. It takes into account social and environmental aspects such as resource scarcity, employment standards, human rights, diversity, and ethical corporate practices.
In order to understand why it is time to change the focus to sustainable investing and what are the major problems, Mint spoke with a number of analysts. They stated the following:
Divam Sharma, founder, and CEO of Green Portfolio
With an estimated $40 trillion in assets under management (AUM), sustainable investment has finally entered the mainstream.
Green bonds, ESG funds, choices emphasizing social obligations, impact, and sustainability, as well as platforms for investing in carbon credit, are available as options.
In the stock markets, we observe that businesses that prioritize ESG practices gain business efficiencies, suffer fewer penalties, enjoy greater stakeholder goodwill, and attract more funding from investors that prioritize sustainability with less volatility and higher valuation multiples.
We believe that small and midcap companies are increasingly adopting sustainability practices and will benefit greatly from their efforts and be rewarded with higher valuations. Currently, database providers and rating agencies only provide ESG ratings for a smaller spectrum of large listed companies. We think that focusing on sustainability will result in big returns and that now is an excellent time to use this investing philosophy.
Investors can customize their target areas and product choices to take part in this journey because it is not a one-size-fits-all situation.
Aditya Gaggar, Director of Progressive Shares
A sustainable investment strategy aims to provide long-term financial returns while taking ESG (environmental, social, and governance) concerns into account. In order to make better financial judgments, this technique makes reference to a fresh aspect of thorough analysis.
Growing small and midcap enterprises into larger market capitalization essentially demands the ethical vision of the management, in addition to taking into account ESG and cultural concerns. The notion of the “triple bottom line,” emphasizing the 3Ps (profit, people, and the planet), emphasizes that management is the alchemist who needs to walk the talk in order to identify inherent values that create a positive influence and drive change on a global level.
You should keep in mind that not all long-term investments are inherently sustainable, and the idea of a sustainable long-term investment is currently in jeopardy. Tatva Chintan Pharma, Aether Industries, La Opala, HBL Power, GMM Pfaudler, Sudarshan Chemicals, and Supreme Petrochem are just a few of the companies Progressive Shares recommends as strong competitors in this category of sustainable enterprises.
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S. K. Hozefa, CEO, of Tradeplus Online
There are several compelling reasons why investors should take advantage of the current chance to invest in sustainable projects. The government of India has set out lofty goals to cut carbon emissions and attain net zero by 2070 in response to the country’s rapidly increasing energy demand. The government is focusing on important industries including urea fertilizer, steel, refineries, and non-urea fertilizers as part of its plans to produce five million tonnes of green hydrogen yearly.
It can be wise to invest in green energy suppliers as well as renewable energy sources like solar, wind, tidal, and battery storage. These businesses have enormous growth potential because of the rising need for renewable energy. A suitable choice may also be to invest in clean energy exchange-traded funds (ETFs). With the help of these funds, you may spread your investment among a number of renewable energy businesses, thereby lowering risk.
Shrey Jain, Founder, and CEO of SAS Online
As we all comprehend, sustainable investment encompasses financial instruments that investors use to try to make money while doing good for the environment.
Investors aim to promote businesses that share their values and make a beneficial contribution to society by incorporating environmental, social, and corporate governance (ESG) viewpoints into conventional investment approaches.
Following the Covid epidemic, ESG investing has grown significantly both in India and beyond. We can observe that younger investors, who place more focus on ESG aspects, are becoming more interested in sustainable investing. Traditional investors, however, are still mostly skeptical of it.
Several justifications for investors to think about sustainable investing right now include: ESG investments have the potential to perform well because businesses that prioritize ESG issues frequently implement sustainability strategies, which improve operational effectiveness, cost savings, employee retention, employee innovation, and risk management. All of these elements work together to increase shareholder value.
