Should All Companies Participate in ESG Investing?
April 18, 2016 Leave a comment
As the world warms up and resources dwindle and disappear, this is the time for businesses to make their investments do more good than just to earn profits and boost shares. Socially responsible investing is increasingly becoming a core part of companies’ missions as they seek to generate returns while simultaneously doing good things for the world in which they work. It’s time for all companies to work towards benefiting social issues as well as themselves.
Environmental, social, governance concerns, and profits must exist together, argues Ken Mehlman, global head of affairs at private equity firm KKR, which has spent billions of dollars on initiatives for clean water and food sanitation around the world. Mehlman does not believe that companies should have to choose between social responsibility and profits. “The world will only be saved at a profit, and the only way you are going to make a profit today is to understand the world. ESG can help you do both,” he said.
In the United States, $7 trillion has already been invested in ESG strategies, a $4 trillion increase since 2010. The ESG sector is expanding, and that’s a good thing.
“I’ve see more interest in the past two years than I’ve seen in the past 17 years,” said Joe Keefe, chief executive at Pax World Management. Part of this increase, he adds, is because women and Millennials, who tend to be the most interested in giving and charity, are becoming larger parts of the American workforce.
With that kind of money and power behind it, ESG investing is poised to do so much good for the world. KKR has invested in new farming techniques, water cleanliness, and food sanitation for millions of people in China. And another of KKR’s investments has made it possible for millions of workers to receive a retirement pension, a good thing for people and for business.
ESG opportunities are good for the business, too. According to a 2012 study by the Harvard Business Review, $1 invested in 1993 in companies with good social and environmental policies would be worth $22.60 in 2010. That same dollar from 1993, invested in a company without those policies, would only be worth $15.40.
Given the good these investments have already done, imagine what else we could do if we are smart with our businesses! What more could your company be doing?