Corporate action to address sustainability issues continues to increase. This week Coca Cola pledged to switch to 100% recycled plastic PET bottles in Sweden, reducing its use of virgin plastic by 3500 tonnes annually and supporting UN Sustainable Development Goal 12 – Responsible Consumption and Production. And easyJet announced it would spend over EUR 29m to plant trees and prevent deforestation in an attempt to offset its carbon emissions, backing SDG13 – Climate Action.
In our UBS Investor Watch survey, 82% of investors said they believe the stocks of sustainable companies are attractive places to put their money because these companies are forward looking and better managed; another 80% want to invest in firms that represent their values.
But only 44% of respondents said they have sustainable investments in their portfolio. In our Year Ahead 2020 we suggest ways investors can better align their investments with their values:
* Fund disruption. Funding companies are pioneering ways to reduce carbon emissions and pollution. We believe firms offering innovative new products and services in everything from renewable energy and energy-efficiency technologies to alternative protein sources and waste management have scope to effect positive change and deliver attractive financial returns. The investments can be made via thematic public equity funds that buy company stock, or through private equity or debt.
* Invest in the leaders. Investors can also place funds with companies leading the way in addressing environmental, social, and governance (ESG) challenges in their industry. We believe such firms are likely to see attractive returns due to their leadership in key trends. Examples include healthcare companies making medicines affordable in emerging markets and IT companies reducing energy usage and thereby shrinking the carbon footprint of their data centers.
* Support firms with room to improve. An “ESG engagement” approach identifies firms with the potential to improve ESG standards and uses investor influence to promote best practices. In doing so, it has a positive impact on sustainability and potentially on the long-term business prospects of the firms themselves. Examples include influencing the behavior of a boat manufacturer whose waste plastic ends up in oceans, or of a financial services firm whose inflexible working hours make it harder for women to reach leadership positions.
In the decade ahead, greater adoption of sustainable products and services is likely. Investors will need to adapt to this change. But they can also use their capital to help achieve and shape it as well. By replacing traditional with sustainable investments, investors can position their portfolios to benefit from the most significant trends over the next decade.
Read more in our Year Ahead 2020: The Year of Choices, The Decade of Transformation.