Julia Granat about sustainable investments

In recent years, investing in sustainable companies has gone from being a trendy strategy for Swedish investors, to something many now see as a must in the portfolio. Risk and return have always been the most important factors in building a stable stock portfolio and for decades investments in fossil fuels, the tobacco industry and the arms industry have been seen as obvious choices. The annual report has contained all the clues for economic development and financial progress has been closely followed.

But something changed. First, statistics showed that many investors are prepared to give up returns and also accept a higher risk in favor of companies being able to work more sustainably (Lewis and Mackenzie, 2000). Thus, long-term sustainability goals appear to be more important than short-term returns for many investors and the trend was strong. Now, however, another shift seems to have taken place. A shift where almost everyone realized that if the companies don’t change, they have no chance.

In step with both regulations and demand, there have been more demands on companies to also report their sustainability results. From 1 January 2024, with reporting in 2025, large companies with more than 500 employees must comply with the requirements of the CSRD. From 1 January 2025, with reporting in 2026, large companies with more than 250 employees must comply with the requirements of the CSRD. (EU directive on corporate sustainability reporting – Corporate Sustainability Reporting Directive.)

There are many reasons to invest in sustainable companies.

First, sustainable investment is a response to the growing global challenges such as climate change and social inequalities. By investing in companies that actively work to reduce their environmental impact and promote social justice, investors can play a role in supporting a more sustainable and just world.

Second, research shows that sustainable investments can be just as profitable, if not more profitable, than conventional investments in the long term. Some investors are still skeptical of sustainable investments, believing that they will forego returns to support sustainability. But studies show that companies with strong sustainability practices have the potential to outperform their competitors financially. By focusing on environmental, social and governance (ESG) aspects, investors can identify companies that are in phase for long-term growth and stability.

Third, sustainable investments affect companies’ long-term profitability by reducing the risk of negative events. Companies that do not take responsibility for their environmental and social impacts are at greater risk of legal penalties, negative publicity and loss of customers and business opportunities. By investing in companies that integrate sustainability principles into their operations, investors can minimize the risk of negative surprises and create a more stable and sustainable portfolio.

Fourth, the increasing awareness of sustainability and demand from investors and consumers is driving companies to adapt to sustainable business models. Companies that demonstrate commitment to sustainability can benefit from increased market growth, improved brand value and loyalty from customers and investors. By investing in these companies, investors can help drive a shift towards more sustainable and responsible business practices.

In summary, it can be said that it has come full circle; sustainable companies have performed strongly in the statistics, which has meant that investors are now setting even higher sustainability requirements, which has led to tougher regulations. Finally, it can be said that sustainable development is here to stay once and for all, and the companies that do not develop in the right direction will find it difficult to survive.

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Mail: juliagranat@live.co.uk

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