The benefits of sustainable investment are becoming increasingly clear to investors, as they recognize the long-term objectives that will define the business model and build on the limited practice of environmentally friendly business leaders. In a report published by Accenture and the United Nations Global Compact (UNGC), 80% of the high-level executives interviewed believe that sustainability is a way to gain a competitive advantage in today's global market. The presentation of sustainability data has become a crucial part of obtaining certifications and attracting investors. With exchange-traded funds (ETFs), special-purpose acquisition companies (SPAC), funds, index products and derivatives, as well as direct investments in stocks, the spectrum of sustainable investments is expanding.
The deficiencies that investors highlight have now existed for some time, but were mostly acceptable to early investors in sustainability and diverse civil society stakeholders, who used to be the main readers of sustainability reports. Doing so will allow the company to be classified as a sustainable investment before and after the Initial Public Offering (IPO) and to target broader groups of investors internationally. The type of data that investors use varies depending on the investment strategy and internal capacities for sustainability analysis. As the director of sustainable investments at a major asset manager explained: “We have jobs in more than 4,500 companies. Investors say they can't easily use companies' sustainability disclosures to accurately inform investment decisions and advice.
First, they can articulate the sustainability disclosures that matter most to their investment decisions and transmit these interests to companies. To take into account the effects of a constantly changing world, more and more investors are adopting strategies that take into account relevant environmental, social and governance (ESG) factors, an approach generally known as sustainable investment. We also thank Bank of America for supporting the Sustainable Investment Initiative's data initiatives and the Ford Foundation for providing core funding to the Initiative. The unusual and challenging thing about sustainability-focused investment analysis is that companies' sustainability disclosures don't have to meet shared standards in the same way that their financial statements do. Despite the increase in interest, sustainable investment is by no means a natural thing for capital markets.
In addition, research by Morgan Stanley indicates that most large asset owners are integrating sustainability factors into their investment processes. Just as investors use traditional financial data to assess business performance, they use ESG data to assess the sustainability context of investments. Until investors clarify what sustainability information they want and help streamline frameworks and regulations, sustainability reports may continue to provide less material information than they would like. To begin with, research organizations must continue to develop analytical and data solutions that serve as the basis for smarter investment analysis and participation in sustainability. The advantages of sustainable investing are clear: better risk management, cost optimization and savings, improved decision-making capabilities, increased corporate trustworthiness and reputation among customers and investors alike. As more investors recognize these benefits, sustainable investing is becoming an increasingly attractive option.
