For me, it is that sustainable investing can be more profitable. A truth a lot of investors would find challenging to accept. There is a commonly held view that companies who behave responsibly tend to do so at a cost to profits, and therefore their investors. So people conclude, that whilst investing for the greater good would make them feel warm and fuzzy, it isn’t really why they invest. They invest to make money. So they continue to fund companies with poor social, ethical and governance behaviour.
Which is tragic, because investing can and should be a force for positive change. But by investing in corporations with bad ethical behaviour, you’re not just accepting the status quo, you’re powering it.
Luckily, this doesn’t have to be the case. You can invest to make money and do good. Here is the main reason: Ethical behaviour can reduce costs for the company, making them more profitable.
Many global corporations, although still the minority, are making significant reductions in their
bottom line through a focus to their social, environmental and ethical policies. Some are doing it due to CSR policies, some from consumer pressure and some, if you want to be cynical about it, simply for greater profit. But the net result is the same.
By focussing on recycling, self sufficient electricity generation and more efficient and environmentally friendly supply chains (among other things) these corporations are becoming more efficient.
In doing so they decrease their costs and yes, make more profit. Whilst they might not score a full 10/10 on their ethical performance, businesses like IKEA and even Unilever, have reduced costs through more sustainable practices. Benefiting both themselves and the world around them.
You can also argue that as they become less reliant on other companies for their energy and resources they have greater control of their own destiny and are therefore less of an investment risk. A good indicator of long term sustainability.
As an investor, and good citizen, this is great news. Ultimately it’s your money and you are investing it for a reason. To make a profit and grow your own personal wealth and hopefully also to support your higher purpose. If you are smart about it you can both earn a profit and help secure a more sustainable future for us all.
Don’t underestimate the power of investing. Investors are the lifeblood of most big companies and by choosing carefully which ones to invest in you can help influence the output of all corporations. The ones that don’t get your money will have to improve or die.
Image: Evan Kirby