Do investors care about sustainability?

Sustainable initiatives provide returns. Investors are certainly listening to that.

Money talks. Investors listen.

This mantra is one of the simplest ways to describe the capitalist worldview that has governed many economies since the birth of trade. But while money has always been the major driver of investment and business development decisions, a new study has shown that the world is changing, and managers may be yet to catch on.

The deafening triple bottom line

While it is only natural to succumb to the influential voice of money, the triple bottom – requiring businesses to think about people and the planet, as well as profits – has risen from a whisper to a roar. The song has comprised mainly of consumers and activists, but according to a recent survey, even investors, who by nature are apprehensive about principles surrounding authentic corporate social responsibility, are joining the chorus in force.

In collaboration with The Boston Consulting Group, MIT Sloan Management Review analysed a pool of over 3,000 respondents from commercial enterprises to investigate attitudes towards environmental, social and governance metrics. The results found that around six in every 10 investors sees tangible value from sustainability initiatives, with 75 per cent attracted to the actual improvements in revenue performance and operational efficiency that such organisations attain.

However, far fewer managers have shown to care for such issues, demonstrating a misperception of the modern investor's priorities.

Revising the investor stereotype

Under traditional management models, the shareholders held the power. They were primarily interested in taking pickings from their money tree as soon as possible, therefore many managerial decisions sought to provide short-term returns instead of laying down deeper roots to ensure long-term sustainability.

But this archaic presumption may be scaring investors away, especially those who now view issues that may have been deemed frivolous in the past as extremely important. When we consider the report's revelation that organisations which have adapted to a sustainability-related business model are twice as likely to generate profits than those that have not, it becomes clear why sustainability is not just important to investors but to all strategic business planning.

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