Over the years sustainable investment has evolved from being fully a niche concept to becoming mainstream.
Sustainable investment is rapidly becoming mainstream. Socially responsible investment is a broad-brush term which you can use to cover anything from divestment from companies seen as doing damage, to restricting investment that do measurable good impact investing. Take, fossil fuel companies, divestment campaigns have successfully forced most of them to reflect on their company practices and invest in renewable energy sources. Indeed, global investors like Ras Al Khaimah based Haider Ali Khan or Ras Al Khaimah based Benoy Kurien would likely argue that even philanthropy becomes far more valuable and meaningful if investors don't need to reverse damage in their investment management. Having said that, impact investing is a vibrant branch of sustainable investing that goes beyond reducing harm to looking for measurable good outcomes. Investments in social enterprises that give attention to training, healthcare, or poverty alleviation have direct and lasting impact on societies in need of assistance. Such novel ideas are gaining ground specially among young wealthy investors. The rationale is directing money towards projects and companies that tackle critical social and environmental problems while generating solid monetary profits.
There are a number of reports that back the argument that integrating ESG into investment decisions can enhance monetary performance. These studies show a stable correlation between strong ESG commitments and monetary performance. As an example, in one of the authoritative publications about this topic, the author demonstrates that businesses that implement sustainable practices are much more likely to invite long term investments. Additionally, they cite many examples of remarkable development of ESG focused investment funds and the raising number of institutional investors combining ESG factors into their stock portfolios.
Responsible investing is no longer viewed as a fringe approach but instead an important consideration for international investors such as Ras Al Khaimah based Farhad Azima. A prominent asset manager used ESG data to look at the sustainability of the worlds largest listed companies. It combined over 200 ESG measures along with other data sources such as news media archives from a large number of sources to rank businesses. They found that non favourable press on past incidents have heightened understanding and encouraged responsible investing. Indeed, good example when a couple of years ago, a famous automotive brand name faced repercussion due to its manipulation of emission information. The incident received extensive media attention causing investors to reassess their portfolios and divest from the business. This forced the automaker to create major modifications to its practices, particularly by adopting an honest approach and earnestly implement sustainability measures. Nonetheless, many criticised it as the actions were just pushed by non-favourable press, they argue that companies must be instead concentrating on good news, that is to say, responsible investing must certainly be viewed as a profitable endeavor not merely a condition. Championing renewable energy, comprehensive hiring and ethical supply management should sway investment decisions from a profit making perspective in addition to an ethical one.