Can investing in sustainability be profitable?

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September 13, 2021 (Investorideas.com Newswire) The planet comes before profit, but here�™s how sustainable choices can actually drive wealth.

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Although sustainability as a concept appeared in the 1980s and, for many years, it was somewhat of a niche topic. Initially only talked about among activists and environmental organizations, sustainability started to truly take off in the early 2010s, when even the average person became aware of its importance and started caring about the impact of their choices. Throughout the years, sustainability and investments had a complicated relationship. At first, everyone thought that sustainability was nothing more than a fad and questioned the performance that green stocks could have in an investor’s portfolio. Then, as time went on, they became some of the most popular alternative investments. Now, almost every investor and business is aware of the financial potential of the green market, and even skeptics agree that this is an option worth considering.

And yet, many people don’t fully understand how money and sustainability can go hand in hand and how it can help investors and businesses in the long run. Here are the top ways in which intelligent sustainability investments can be profitable:

Green investing is now a megatrend.

Analysts have been forecasting a surge in green investments for a while now, but it’s finally here, and it’s a megatrend. Set against the context of a global pandemic that has raised many environmental concerns, green investing is breaking records. Governments are increasing investments and subsidies for green industries, and there’s a big push towards environmental policies. For example, Germany plans to switch to renewable energy by 2038, and Australia wants to boost the recovery rate from all waste streams by 80% by 2030. As a result, green stocks are becoming some of the world’s most promising companies. In 2020, the total value of sustainable investment assets worldwide reached $35.3 trillion, which is more than double to 2019, and it’s expected to grow even more in the following years.

And it’s not just investors. Businesses are also paying attention to sustainability. In the past, there was a myth that environmentalism is a trade-off for profitability, but now it has become clearer than ever that sustainable choices can save money. Sustainable business investing focuses on two major subcategories:

  • Identifying the practices that caused environmental damage in the past and replacing them with sustainable alternatives that also happen to save money. For example, a company that used to send waste to the landfill can start sorting waste in special containers and recycling it to save money on waste collection and landfill taxes. In fact, the use of specialized balers and compactors has increased exponentially in the past few years. Renting is a perfect low risk investment for businesses, although many do end up purchasing them, convinced of their long-term benefits.
  • Investing in next-gen sustainable technologies that save money. For example, companies that have mostly relied on fossil fuels can invest in renewable technologies with a high ROI. Lately, we’ve seen a lot of companies that have included all-electric vehicles in their fleet and plan to go full-electric in the following years, and that includes car companies.

It should also be pointed out that the sustainable investing megatrend was started by Millennials. At present, around 33% of Millennials often or exclusively make ESG investments, but other generations are starting to show interest too. In a recent survey, nine out of ten investors said that they want to invest in a way that leaves a positive mark on the planet.

Sustainable businesses can attract top talent and investors.

Apart from cost savings, sustainable investments in business can also add value and bring revenue indirectly, by attracting investors and top talent. Needless to say, sustainable companies are more likely to gain customer trust.

Although sustainability alone is not enough to attract investors (you still need a good product and a suitable business model), you should keep in mind that sustainability can be a differentiating factor. First of all, for financial reasons, because some old and outdated processes can be wasteful and cost too much money. And secondly, because an investor might not want to associate themselves with a company that doesn’t take sustainability into account.

Sustainability may also be key in building a strong workforce. According to a recent study, 53% of UK workers say that sustainability is an important factor when choosing an employer. The percentage is higher in the 16-24 age group, where 67% of people care if their company has sustainable policies in place. The findings don’t come as a surprise, considering that Generation Z has many young activists.

Ultimately, some of the world’s most profitable companies have a sustainable agenda, and it’s these companies that people want to work for.

In business, sustainability is about increasing efficiency as a whole

For many years, businesses rejected sustainability because they thought it was too expensive. However, sustainable investments almost always pay off for themselves in the long run, so executives need to focus less on individual costs and more on increasing efficiency as a whole. So, when faced with the possibility of a sustainable investment, the right question isn’t “How much will this cost me?” but “How will this help me streamline operations as a whole?

Let’s take waste management, for instance. When analyzing the possibility of bringing waste compactors on the premises, you shouldn’t just inquire about their costs and only take this into account, because this is just one of the factors to keep in mind. For example, a waste compactor can add value to your business by reducing the landfill tax and the number of waste pickups. Plus, it can make the workplace cleaner and safer, which means a lower risk of work accidents, smoother operations, and higher employee satisfaction. In this case, the benefits clearly outweigh the costs, so this is a good example of how sustainability can bring profit in the long run.

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