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Sustainability: A growing indicator for identifying multibaggers

The concept of sustainable investing has created new potential for steering the future of investments towards being more globally responsible.

July 29, 2021 / 01:50 PM IST

Everything is connected. Every little action undertaken by any individual initiates a ripple that impacts numerous other entities in the pool.
What most people believed until recently is that the industry of finance and investment is mutually exclusive from the rest of the worldly fabric. However, with the globe rapidly sliding into warmer temperatures and rising social concerns everywhere, the niche of investment now stands at the precipice of transformation.

Investors are now beginning to recognise the negative environmental and social footprints that businesses are leaving behind as they rise and grow.

Sustainable Investing: The Way Forward

The corporate social responsibility and ESG (Environmental, Social, and Governance) impact of a business must be taken into consideration while making investment decisions. Pioneering a contemporary approach towards dealing with climate change, social and ethical responsibility as a community, the concept of sustainable investing has created new potential for steering the future of investments towards being more globally responsible.

Businesses that are poised to bring positive changes in the climatic and social ramifications of development and growth are given preference by investors, thus helping drive the sustainability movement in the finance sector. If you look at the estimated global assets in ETFs and mutual funds exclusively in Sustainable Investment funds, they are set to reach ~$1.8 trillion by the year 2028!

So, what are the key drivers of this sustainability movement in the investment sector?

1. Investors today have higher expectations from companies than before. They are looking to invest in businesses whose outputs are ethically influenced.

2. Governance authorities have brought sustainable, eco-friendly solutions into their onus, fusing them together with investment decision-making. Investment is no longer free from the responsibility of developmental repercussions.

3. Recognising the ESG traces of a business can lead to improved analyses of investment risks and help drive better returns.

Rewarding Efforts Towards Sustainability

Promoting investment as a package deal in tandem with sustainability is rewarding in terms of a better future. International Research Institute for Manufacturing (IRIM) recognises the need for contemporaries to work together in creating an environmentally and socially balanced future for development through ecologically sustainable manufacturing.

The India Green Manufacturing Challenge (IGMC) Awards 2020-21 is focused on encouraging manufacturers to adopt greener, more environmentally responsible solutions for manufacturing to help future generations live on a healthy planet. It applies a Green Manufacturing Framework comprising of four elements (human, input, operations, and product) based on which the entrants are evaluated for the awards.

In the previous IGMC Awards listed organizations like (Reliance Industries, Hindustan Unilever, Aditya Birla Group, Tata Group companies, JSW Steel, Larsen and Toubro, ITC, Sun Pharmaceuticals etc) have been recognised. Most of these organizations today at least have a department tracking and driving sustainable practices across the organizations.

"Any financial model on the future valuation of a company that does not account for sustainability factors of the business and its operations is irrelevant and unreliable" – Anand Louie, Director, International Research Institute for Manufacturing

In Closing

Sustainable investing is carving a road to the future of development and growth by bridging the gap between the planet and its inhabitants through the building blocks of ESG responsibility.

You can watch the organisations who are taking a step forward towards greener practices on Indian Green Manufacturing Awards, 2020-21 on CNBC TV18 on 1st August, 3 pm.

Moneycontrol journalists were not involved in the creation of the article
Tags: #Features
first published: Jul 29, 2021 01:49 pm
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