As world leaders assembled for COP26, there was a sharp focus on government policy, commitments to decarbonization and plenty of talk about "a greener future." But on the sidelines of this global event that places the public sector under the spotlight, the private sector too must consider its own future in the context of climate change.

It is widely agreed that implementing genuine environmental, social, and corporate governance (ESG) policies are a necessity for any bona fide organization today. Gone are the days where a global corporation can claim that using paper straws makes it an environmentally responsible group. Not only is it vital for the planet that corporations ditch greenwashing, but it is important for companies to consider the implications of ESG policies on attracting new investment.

Investors today have a different set of priorities compared to a decade ago and generally demand more than a return on investment. Often, they want their investments to either have a positive social or environmental impact and at the very least want to avoid those that have a negative impact.

I was particularly struck by a recent survey from a global investment bank, revealing that 13% of investors already have more than a quarter of their total investments channeled into sustainable solutions, compared to just 2% in 2020.

The same survey, Standard Charter’s Sustainable Investing Review 2021, suggested that investors now realize that financial and non-financial returns can co-exist. Indeed, investments can generate a profit while still doing good and prosperity does not have to come at the expense of social or environmental progress.

In fact, the survey noted 75% of investors believe it is possible to do good and make money at the same time. And only 41% believe that monetary return alone is the best measure of the success of their investment.

It’s clear that the investment landscape is shifting rapidly, and businesses must evolve alongside the change. Organizations today need to be able to prove the effectiveness of their ESG policies and demonstrate a genuine commitment to reducing their carbon footprint, for example. I would certainly encourage companies to go further and aim to go carbon negative to show investors how serious they are about their environmental commitments.

It is necessary to note that while we are at a tipping point when it comes to sustainable investments, there is still a degree of apprehension within the investor community. For instance, 74% of investors would be more comfortable with sustainable investment if they received professional guidance. Businesses have an opportunity now to inform, guide and educate investors to alleviate any concerns.

Of course, implementing genuinely effective ESG policies incurs costs. And when it is difficult to see a direct and short-term financial benefit, there is little motivation for companies to invest heavily in new schemes.

But leaders must consider the long-term returns of swapping greenwashing for strong ESG policies and the implications of delaying firm ESG policies. With 70% of investors preferring to avoid investing in organizations that have poor ESG practices, those companies that don’t implement genuine policies risk struggling to attract fresh investment.

The pandemic has highlighted the importance of working towards a more responsible society, fuelled by a sustainable economy. Investment groups and wealthy individuals are increasingly aware of their responsibility and the impact of their investment decisions.

As the world rebuilds and aims for a more responsible, robust, and prosperous society, with a new onus on conscience and accountability, now is the time for corporations to wash away the old and present themselves as appealing opportunities to a modern and more self-aware investment community.

Muneera Isa is HR Director at GFH Financial Group


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