Bring in the
A company’s operations can benefit from sustainability in many ways, for example through more efficient production. But what about simple investment returns? Investing in green stock options will expand a company’s portfolio, possibly into markets it has never before invested in. This in turn diversifies risk, making the company more resilient to potential fluctuations or downturns in the market. Investment in a wide range of green solutions and technologies is therefore a strong strategic move, as is environmental, social and governance (ESG) investing.
“We see more and more consumers voting with their money by choosing to buy more sustainable products and services, and companies should do the same when placing capital. Leveraging technology can help build a portfolio that will bring the greatest returns.”
Florent Andrillon, Vice President, Global Head of Sustainability solutions at Capgemini Invent
Taking stock of the
Letting environmental concerns inform investment is becoming common among companies in a range of industries, and it’s not just about saving the planet.
More and more organizations incorporate ESG investing, or “impact investing,” in their strategies as a means to increase long-term value, based on the idea that environmental and social factors affect companies’ financial performance. Impact investing uses ESG metrics to identify risk and growth opportunities, and can simply mean backing companies that are on the road to sustainability, with clearly defined sustainability KPIs and proper reporting: Some studies suggest that companies with better ESG disclosures are better at risk and reputational management, which are obvious value drivers.7
“Green investment” is a broad term that encompasses investing in green bonds, green exchange-traded funds, and index funds. It can also refer to holding stock in companies that are particularly strong in green initiatives like conserving natural resources or reducing pollution. About one in five executives believe that green investing will be the most disruptive investment trend inMD1 the coming years. This figure increases to one in four among companies in the public sector or government roles. This speaks to the likelihood of more government involvement in the green investing sector in the immediate future.
By understanding and harnessing its strengths and potential oversights, a company can find the opportunities that make the most sense for its industry and diversify its portfolio the most.
of organizations have been able to attract more capital since launching sustainable product design initiatives7
Trend watch 2023
Clean up your supply chain
In the immediate future, we see companies continuing to pay particular attention to their supply chains. Currently, 55% of executives believe that sustainable supply-chain financing will disrupt their industry in the next three years. Companies are already focusing on generating the most returns on their money by putting it directly into their own production or suppliers. In the short-term, this is an advisable and profitable strategy.
In the medium- to long-term, companies will turn to and adopt true green investing, such as purchasing green bonds or investing in sustainable companies. Just under half of executives responding to our poll said their company has already begun green investment. Furthermore, over half (57%) agree that green investment will be a trend in the coming three years. With sustainability frontrunners already shifting to a more environmentally conscious investment strategy, we expect to see other companies in the industry follow suit.
Because of the wide array of options that fall under the umbrella of green investment, each company will take its own approach and create unique portfolios. This paints an exciting picture of the future of this emerging investment market.
Tech for the planet
Tune into investment tools
Advancements in AI have improved financial advisory services to provide accurate analysis for investors that consider a range of factors. Automated, algorithmic wealth management platforms, also called robo-advisors, manage investments with minimal human supervision. They can now target responsible investments based on criteria such as company size or industry, or to support specific segments such as female-led businesses. Some platforms even use AI to filter out companies engaged in greenwashing, based on deep neural language capabilities.
On the investee side, selecting a reliable platform through which to share data is key. A business should also identify the best data control software to help manage large volumes of information internally and for its investors. The more trustworthy the tools an organization uses to prepare its reports, the more trustworthy that report will be.
Generating returns on investment will require an “all hands on deck” approach that will take the collective work of all the C-suite, with a particular focus on three key players.
If you're the CFO
The Chief Finance Officer is the leader in establishing and coordinating sustainability and financial initiatives.
You should incorporate green investments such as green bonds, green exchange-traded funds and index funds in the company’s portfolio.
Your role also includes pioneering opportunities for collaboration with outside firms.
If you're the CPO/SCO
The Chief Procurement / Supply Chain Officer will play a key role in continuing to support sustainable supply-chain investment.
Look for openings where you can work directly with suppliers to support their sustainability journeys. One example might be sponsoring renewable energy projects for them, to improve sustainability and encourage fair labor practices.
Monitor progress and take action as required.
If you're the CMO
As the Chief Marketing Officer, you’re tasked with creating your company’s brand around sustainability initiatives.
Cultivating an optimistic, yet realistic picture of the group’s achievements will encourage potential investors to take notice. You must present your organization’s strengths to all external stakeholders, and avoid anything that can be construed as exaggerating your positive impact. Writing the narrative of your company’s sustainability journey – where you started, where you are now, and where you hope to go – will help current and future investors understand how you are leveraging their capital to help the planet.
It is also your job to ensure the company’s green investments are promoted in financial documents, quarterly earnings calls and board materials.
Overall, you must ensure all messaging is consistent and that sustainability integrity is reflected in all reporting.
Your board may already be fully engaged in environmental work, but do your consumers know that? As your company adapts, you should build sustainability profiles on each of your non-executive board members. These short texts should explain their skills and how they are facilitating the company’s successful and profitable transformation.
The role of the board has never been more key, especially with emerging regulations and standards. Board members can also help link sustainability targets to compensation and involve employees by forming inclusive supervisory boards. A strong social governance policy will empower the board to make the best possible decisions for everyone in the company. More and more, we see that companies involving employees in advisory roles are making more eco-oriented decisions, thus leading to greener operations.8
The board’s role is also important when it comes to encouraging green investments. Board members should take a long-term value-creation view when considering the company’s investment strategy, and incorporate ESG concerns into their decision-making processes.