Despite the push for environmental, social and governance (ESG) investing, there are increasing numbers of private organisations who have become disenchanted with the idea of green investing after being faced with the reality of what this might mean for their operations and profits.
In this article, the team from Axiom Consulting, a Yorkshire based firm seeking to help UK businesses embrace sustainability take a closer look at green investing, exploring what it is, why its relevant and discussing how the lack of support from big businesses will significantly hinder the fight against climate change.
What is Green Investing?
Eco-investing – also known as green investing – is a form of socially responsible investing where investments are made in companies that support or provide environmentally friendly products and practices.
Whilst it is not quite the same as ESG investing – which actively selects companies that meet specific requirements – most forms of sustainable investment fall under the same umbrella.
Ultimately, green investing is about investing in companies based on more than just financial incentives – ensuring that the companies uphold certain values when it comes to people and planet.
Exploring the Challenges of Sustainable Investing
However, despite the potential that green investing has in taking climate change head on – there has been notable individuals heading organisations who have expressed their scepticism, stating it’s wrong to ask the private sector to ensure companies they invest in are doing their part to combat climate change.
This comes after Larry Fink, the director of leading investment and multi-billion pound company BlackRock was quoted in an interview with Bloomberg TV as saying: “I don’t want to be the environmental police.”
These comments are particularly notable as they represent a significant U-turn for BlackRock, which had previously been at the forefront of Wall Street’s emphasis on ESG investing.
The reluctance of organisations to embrace ESG is likely to do with its specific criterion and expectations – a reality that may not align with the current operations and practices that big businesses rely on to generate large profits. This is because implementing sustainability across an organisation’s operations can be costly and cause delays whilst more eco-friendly alternatives to current practices are established.
This means that many investors, entrepreneurs and hedge fund managers won’t want to invest into companies on their green credentials alone, as some of the most lucrative opportunities may not be the most environmentally friendly.
The situation is further complicated by the fact that green investing is still a fairly convoluted and in some cases, misunderstood area – with many businesses using it as a means to pedal inaccurate information and claims about their emissions.
This has led to many organisations being accused of greenwashing – such as Deutsche Bank, who earlier this year were raided in $1tn greenwashing inquiry, in which they were accused of selling investment products as more environmentally friendly than they were.
This could lead to other businesses being hesitant to invest in companies claiming to be sustainable, in case similar situations arise further down the line.
Why Does Green Investing Matter?
Sustainable, green and ESG investing all wield significant power in the fight against climate change. It encourages corporates, which are some of the biggest sources of carbon, to make more environmentally friendly decisions in order to receive the financial support they depend on for growth.
It’s also ethically the right thing to do. Climate change and environmental damage is everyone’s responsibility, so it’s important that everyone – including individuals and businesses – work together and make a conscious effort to reduce their environmental impact.
Achieving Net Zero, or any of the SDG’s ambitions will not be possible if large corporations – and by proxy, those with the most power – are prioritising profit above everything else. Blackrock’s move away from sustainable investment sets a worrying precedent, as it may encourage other investors to follow suit.
Bringing Sustainable Benefits to Your Business
As a result, it’s more important than ever to highlight the benefits of green investment and the advantages it can bring to businesses.
Sustainability is a hot topic, and promises to be so for the foreseeable future. As individuals and businesses look to support, work with and invest in sustainable organisations it’s important for businesses to showcase what they are doing to play their part in combating climate change.
Green investing subsequently has mutual benefits for organisations and investors alike. It encourages both parties to engage with ESG and makes the reduction of carbon emissions as a priority – which in turn, can help both parties stay compliant with current and future environmental legislation.
It can also support organisations and investors in building publicly favourable reputations, as it shows they are environmentally aware and actively taking some responsibility in the fight against climate change.
These are benefits that are incredibly valuable to business owners who want to ensure the long-term performance of their organisations – as well as those investors looking to make sustainable, and wise choices with their money.
Making Green Investing Easier
Green investing relies on complete transparency and the ability for both businesses and prospective investors to easily access and see key environmental and emissions data. To achieve this, a business must be able to accurate measure this data – especially Scope 3 emissions which for many organisations, can account for more than 70% of their carbon footprint.
As Joe Oughtred, one of the Founders of Axiom concludes, “We make this easy, providing a firm foundation for sustainable transformation with specialist software that measures, tracks and reports on the sustainability performance of your organisation. We’re also passionate about helping people to make more sustainable investment decisions – whether it’s for a business, or a personal portfolio.”
“Whether you are looking to calculate emissions and visualise your progress, or manage SECR and support sustainable procurement – we can equip you with the right tools and support to ensure that your business achieves its sustainability goals.”