Sustainability has become a ubiquitous term in every sector. And every organization, no matter how large and small, is making moves to ensure its business is helping the planet, not hindering it, KOSEC CEO Michael Kodari points out.
In the US, sustainability is rated as an important purchase criterion for 61% of consumers. In fact, one-third of consumers said they’d be willing to pay up to 25% more for sustainable goods. It’s further evidence that sustainability has come to be the expectation, not the exception, in the future, post-pandemic world of commerce.
As much as sustainability holds sway over everyday purchase decisions, so have they garnered the attention of investors, eager to keep track of global trends just beyond the horizon. Welcome to “sustainable investing”.
Whether it’s become noticeable through investor presentations, news headlines or political campaigning, it can’t be denied how quickly environmental sustainability has become a focus among everyday consumers.
The lowdown on sustainable investing
Sustainable investing is about investors making conscious choices in who they give their money to. For example, someone could choose to make more conscious investments in companies and funds with clearly-outlined environmental, social, and governance (ESG) goals.
Incorporating these ESG decisions into their value propositions allows companies across varying industries to align themselves to the pressing global concern of decarbonization — of which many net zero-related targets are set between 2025 to 2050.
Beyond the moral and socially-responsible impacts associated with sustainable investment choices, investors will, of course, keep an objective preference to ensure healthy financial returns for their portfolios.
This common drive to seek value creation is arguably among the biggest challenges that have stalled the earlier uptake and popularity of ESG-focused investment choices. But with pivots toward greener options made even by dyed-in-the-wool resources and energy companies like Clearway Energy and First Solar, it’s clear to see the time has come for greater adoption of green energies to halt the drastic decline in global environmental health.
Sustainable investing strategies 101
In the same way that investors look to emerging trends to find long-term value creation opportunities in the market, more global companies have dialed into the purchasing influences of the now-majority millennial workforce, and its preference for high-quality ESG practices. Beyond keeping aligned with these preferences through your assessment of viable companies that keep recognizable ESG efforts, a look at the wider industrial landscape will present a number of still-developing trends.
A number of these trends will present as major overhauls within otherwise entrenched industries, such as automotive production and electric vehicles (EV). This industrial shift alone drives plenty of investors away from fossil fuel-related investments towards materials that support the emerging EV market.
Similarly, other efforts to decarbonize will see large investments made to develop a green hydrogen market, as a more sustainable and environmentally friendly source of fuel.
Who to watch in 2022
Salesforce, the popular provider of customer relationship management (CRM) software, has leading market share, a strong leadership team, and predictable, subscription-based revenue. It also caters to larger companies, helping it remain stable. It’s targeting 100% renewal energy by this year and has already achieved net-zero operational carbon emissions. Even more, it’s invested in equality, spending US$16 million on equal pay initiatives.
Nvidia, the producer of graphics processing units (GPUs) used in gaming consoles, supercomputers, robots, and self-driving cars is another leading example for ESG-focused investors to consider. The company is well-positioned for long-term growth outside of gaming with strongholds in AI and autonomous vehicles. Equally as impressive is Nvidia’s ESG initiatives, which include treating people fairly, strengthening diversity and inclusion and pursuing social change through its products.
Risky business
It takes significant effort and investment to achieve lasting, sustainable change. Maintaining a healthy balance sheet with positive cash holdings, low net debt and manageable capital expenditure places companies in good stead to achieve such long-term change and deliver continued growth.
Taking time to understand what companies are sustainable and have commendable ESG efforts can help you become a top sustainable investor.
Michael Kodari, CEO of KOSEC - Kodari Securities
Michael Kodari is the Founder and CEO of Kodari Securities (KOSEC), a leading provider of investment services to a substantial and diversified client base, including corporations and ultra high net worth individuals. With over a decade of experience in funds management and stockbroking, Michael has worked with some of the world’s leading value investors and financial institutions. A philanthropist and a prominent expert in the stock market, CNBC Asia has referred to him as “the brightest 21st century entrepreneur in wealth management”.
About KOSEC
Michael Kodari is the Founder and CEO of Kodari Securities (KOSEC), a leading provider of investment services to a substantial and diversified client base, including corporations and ultra high net worth individuals. With over a decade of experience in funds management and stockbroking, Michael has worked with some of the world’s leading value investors and financial institutions. A philanthropist and a prominent expert in the stock market, CNBC Asia has referred to him as “the brightest 21st century entrepreneur in wealth management”.
