Why should you invest in sustainability?

Why should you invest in sustainability?

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Left, right, front and center - sustainability has quickly become an important aspect of the business world. Sustainability is defined as a way of"meeting the needs of the present without compromising the ability of future generations to meet their own needs". It has become a very important driving force behind business decisions and investment strategies.

By now, everyone is aware of the key reasons why the pursuit of sustainability is important. When we talk about sustainability, we immediately think of the United Nations' 17 Sustainable Development Goals, which focus on education, inclusion, equal access to resources and the fight against climate change, among others. While the social and environmental aspects are very important in creating a sustainable future, we understand that there are also financial concerns when investing, which we hope to address or avoid with the decisions made.

So rest assured! If you're looking for more reasons why you should invest your money where your ethical concerns lie, check out this blog on the financial benefits of investing in sustainability for you and for regional and global markets.

Innovation and market development / competition

By investing in companies that are committed to developing sustainable solutions, you promote innovations that are better suited to meeting human needs with less negative impact.

Innovation also contributes to market competition !

Market competition is good because it ensures that the risk of monopolies is reduced. If a company has a monopoly position in a trade, service or production area, there is little to no diversity and it can set the market price as high as it wants.

While certain markets are becoming obsolete in today's society, sustainability is helping to create new ones. Some emerging markets you may be familiar with are the renewable energy market, electric vehicles and sustainable tourism.

Market resilience

Fighting a global pandemic was no easy task. Unfortunately, in April 2020, around 397,000 people in the European Union lost their jobs simply due to reduced market demand. At the same time, some studies show that companies that are rated higher on the sustainability index are more resilient to market fluctuations. This is usually based on several factors such as better risk management practices, a long-term business perspective and better implementation of adaptation strategies. Another important factor is that sustainable practices are less likely to encounter resource scarcity, such as land degradation.

Compliance with regulations

The legal landscape has changed quite a bit in recent decades, especially with regard to companies and their practices becoming more and more focused on sustainability. For example, in January 2023, the Corporate Sustainability Reporting Directive came into force in the European Union. The directive enforces better rules for social and environmental data that companies must now report on.

If companies fail to comply with the Directive, they will face sanctions determined by the Member State in which the company operates. For example, under the old rules, German companies that fail to comply with their reporting obligations face fines of either €10 million, 5% of annual turnover or twice the amount of profits made or losses avoided as a result of the breach.

Companies that already integrate sustainability into their business practices are already familiar with the type of data that is typically valued in these reports and are less likely to fail to comply with the requirements due to financial interests.

Conclusion

According to the Global Sustainable Investment Alliance (GSIA), sustainable investment reached a total of 35.3 trillion US dollars in the United States, Canada, Japan, Austral-Asia and Europe at the beginning of 2020. Sustainable investing is no longer an optional strategy or a fantasy spawned by social and environmental activists. Investing in sustainability is an essential aspect of responsible business practices. The benefits go beyond those listed in this blog, and the global community is becoming increasingly aware of the urgent need for sustainable solutions to consumer demand. By investing in sustainability, you are investing in a world where economic progress, environmental protection and social justice go hand in hand, paving the way for a better and healthier future. 

To find out more about sustainable investing, sustainability, the United Nations SDGs or how to get started with investing, you can read more of our blogs.