The pandemic has sharpened the focus on sustainability amid shifting expectations and a growing realisation in the corporate sector that it can no longer be business as usual.
The Harvard Business Review (HBR) reports a sea-change in investor focus, one that business leaders had not previously recognized as top-of-mind. In 2022, Investors will start to ask for action through their investment criteria.
Banks will feel this change in temperature and the pressure it puts on the bank’s reputation. Investors—including depositors—will ask banks to disclose the impact of such investments. As a result, forward-looking bank boards will formally direct investment practices away from environmentally damaging opportunities. Instead, they are channeling funds towards investments that go deep and generate a positive impact along with profit.
Deep profit, where companies also commit to environmental, social, and governance goals (ESG), generates investor results. Standard and Poor’s (S&P) Global Market Intelligence analysis of 26 ESG-based exchange-traded funds found that 19 performed better than the S&P 500. Those outperformers rose between 27.3% and 55% in the year between March 2020 and March 2021. In comparison, the S&P 500 increased 27.1%.
As an investor, if it’s just about the money, it is a shallow profit. Deep profit is about money and impact.
According to Joanne Flinn, Chair of EGN Singapore’s Sustainability Peer Group, “Challenges, turbulence and uncertainty bring down many apparently successful businesses, even ones who pay attention to their purpose, their culture and their cash flow. Businesses who endure have moved past simply wanting to win the profits game. It’s like winning an Olympics gold medal, and having no life after the medal. It’s a shallow win. Instead, enduring businesses commit to win deep through their impacts across community, employees and the future – the ESGs in today’s distributed global value chains. This creates resilience and, in turn, businesses that prosper and last.”