Impact and sustainable investing

Is it possible to do good and grow rich at the same time?

06 Jan 2023
Impact and sustainable investing

For some people, money has become synonymous with greed and evil. Hence the saying, ‘money is the root of all evil.’

With news of multi-billionaire dollar corporations misbehaving ever so often, it’s an all-too-easy narrative to believe.

That said, in recent years, there’s been a growing movement for investors to actually do good with their money.

Here’s the rough idea: By putting money into companies that behave well, investors can incentivise good behaviour, and encourage others to do the same.

What’s it called? You might have heard of it by now. It’s called ESG investing, but also sustainable investing, or impact investing.

To be called a ‘sustainable’ company, companies have to score well in all three criteria – E, S, and G.

Let’s go into detail about what those letters stand for.


What’s ESG? 

E is for Environmental. When you hear of companies going ‘Green’, it is most likely referring to the process of becoming more environmentally responsible.

This means trying to minimise such as energy use, carbon emissions, pollution as well as any other impact on the environment or wildlife.

S is for Social
. Does a company pay its employees a fair wage, and treat them with respect? Does it use child labour? Are there enough efforts to ensure workplace health and safety? Is the company’s presence overall positive or negative in the communities it operates in?

These are just some of the questions the social component of ESG deals with. In short, you can think of ‘social’ as the company’s impact on people both inside and outside the organisation.

G is for Governance.The “G” in ESG refers to governance, or in essence, whether or not a company is responsibly run.

Ideally, a company uses accurate and transparent accounting methods, has good and clean leadership, and doesn’t have any conflict of interest among its board members and senior executives.

How to make ESG investments?

While it’s possible for someone to take the time to personally investigate companies to see if they meet ESG standards, it’s often an exercise that takes lots of time and expertise. This is not always practical for busy professionals who need to juggle work, relationships and family.

This is why there’s been a rise in the popularity of ESG funds. These funds are specifically curated by professional fund managers, with the aim of balancing sustainability with returns.

Some funds even let you invest in the specific causes you believe in, ranging from social responsibility to clean energy.

But does ESG deliver returns? 

There has been evidence that ESG investments can outperform non-sustainable ones. In addition, the world’s largest investment manager company, BlackRock, expects that ESG funds will continue to do well in the long run, as the world becomes more conscious of climate issues.

Proponents of ESG believe that sustainable companies will be more profitable in the long term, and in turn, this translates into better returns from investors. Here are three ways ESG might increase a company’s profitability.

Risk reduction. Being a responsible company in all three areas reduces the risks of scandals, accidents or other detrimental incidents happening. In turn, this reduces the volatility of the company’s stock price. This is increasingly important as governments are coming down hard on errant companies.

Talent attraction. Some companies adhere to ESG to attract top talent who care deeply about social and environmental issues. Having top talent means the company has a competitive advantage.

Consumer trust. Increasingly, consumers are becoming more aware of the companies they support. This means that they have the capability to punish companies they view as unethical or misaligned with their values.

All that being said, it’s important to remember that just because a company meets ESG criteria, doesn’t mean guarantees good investment returns.

Is it possible to do good and grow rich at the same time?

Circling back to the first question: Is it possible to do good and grow rich at the same time?

We certainly think so. After all, money is not evil, it's merely an enabler. It is the intention behind how money is used that matters far more.

After all, social enterprises, charity and even investments have shown that money can be a force for good.

As investors and customers, we get to decide how we invest and spend our money accordingly.

The real question is: With this knowledge and money in your hands, what will you choose to enable?


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