Heat and sustainable investments. ESG is a strong pillar of investment

As global temperatures break new records, the financial world is increasingly recognizing the critical role sustainable investments play in creating a positive impact on the environment. ESG is now one of the most important pillars of the investment approach, benefiting both investors and companies. Betting on sustainable assets pays off in the long run.

The growing trend of ESG investments

The current climate situation further emphasizes the importance of ESG-compliant investments. Behind them lies an approach to investing that, in addition to profits, also takes into account how responsibly companies approach environmental (E) and social (S) issues and how well they are managed (G).

The growing awareness of investors about the social and environmental responsibility of companies contributes to the growing interest in sustainable investments. Companies that consistently pursue ESG goals attract investors, which in turn can lead to an increase in the value of their shares and improved financial results.

Sustainability does not escape investors, especially younger ones. According to Impactivate, four out of five millennials consider ESG values ​​when choosing an investment. 89% of them expect a thorough review of ESG factors from a financial advisor before recommending an investment. They know that what they invest in shapes the world they will live in.

Adaptation to climate challenges

In the face of extreme heat waves currently affecting various corners of the globe, enterprises face the inevitable challenge of adapting to dynamically evolving climatic conditions. Companies that take into account the reduction of greenhouse gas emissions and adaptation to new realities in their strategies are more resilient to unpredictable climatic events. This, in turn, translates into operational stability and long-term success.

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Sustainable demand for products and services

In the era of increasing environmental awareness, consumers are becoming more and more demanding towards companies. High temperatures prompt them to choose products and services from companies actively striving to reduce their ecological footprint. This phenomenon leads to increased demand for sustainable goods, which in turn translates into increased income for companies and attractiveness to investors.

Optimization of operating costs

The increase in temperature has a direct impact on the operating costs of many companies, especially in the energy, raw materials and logistics sectors. However, companies investing in ESG can achieve energy efficiency and reduce costs. This, in turn, translates into greater profitability and competitiveness, which is extremely attractive from the investor's perspective.

Reduction of risk for long-term stability

Extreme weather conditions, such as prolonged periods of heat, pose a significant threat to businesses at all levels. Meanwhile, companies that strategically attach importance to ESG issues seem to be better equipped to deal with these risks.

For example, an energy company, instead of relying solely on conventional energy sources, can invest in developing alternative renewable sources, such as solar and wind energy. As a result, when extreme heat reduces the availability of water for cooling at power plants, the company will be able to dynamically adapt its operations to this situation. Investments in renewable energy sources would make it possible to maintain the continuity of energy supply, despite the restrictions related to extreme temperatures and lack of access to water. Thanks to this approach, the company would avoid potential financial losses and maintain operational stability, which translates into long-term sustainability of the business.

Development of the sustainable investment market

Według Global Sustainable Investment Alliance, the sustainable investment market is growing much faster than the traditional one. The organization reports that over the past eight years, the share of sustainable assets has increased by more than 14 percentage points. This is a clear signal to investors that sustainable investments are not only trendy, but also profitable. Moreover, the average annual CAGR showed that the responsible investment market is growing almost four times faster than the conventional investment market.

ESG is for everyone

ESG is no longer just a topic for environmental activists, but for anyone who wants to invest in their future. More and more money is flowing into sustainable investments, and companies are realizing that this way of thinking pays off economically. We are still in the world of investing, which is inherent in market volatility. However, ESG offers both without compromise - investing in accordance with its values ​​and at the same time with a profit.

Article author: Jan Hlavsa, CEO of Fondee