Sustainable Investment : A New Normal ?

Recently, the Prime Minister of India in the G-20 summit pointed out that the world needs to shift from a GDP-centric approach to a Human-centric approach towards development “It’s a time when years-old challenges demand new solutions from us. Therefore, we must move forward by fulfilling all our responsibilities with a human-centric approach,” 

What is this human-centric approach? Its interpretation may be multi-fold and may vary from different perspectives but one thing is more clear, it means inclusive development and a sustainable approach towards global good. 

 One such factor towards ensuring Human-centric development is 'Sustainable Investment'. We all are well aware of sustainable development and I will not take the time to discuss that...those who are not aware of sustainable development may refer to https://www.iisd.org/mission-and-goals/sustainable-development.  

Sustainable Investment refers to an investing technique where investors invest in a company by taking the company's environmental, social and governance factors into consideration. A large multi-national company may be profitable but it is not always the case that it has a good ESG score. After the COP-26 and IPCC 6th report, investors are now revisiting traditional funds and thinking about investing in ESGs.

ESG funds will directly influence companies' business strategies and investment models. Companies which don't follow ESG practices may face challenges in getting funding from investors because, in the case of delay in getting compliance with environmental regulators, they may lose public trust.

With all this, there are also some challenges which ESG funds face like 

1) Limited ESG focus Funds

 2)Cultural Factors  

3)Weak regulatory environment 

4) Limited awareness and inadequate data

5) Most importantly 'Green Washing'. Greenwashing is defined as an unsubstantiated claim in order to mislead customers into believing that a company's products are environmentally friendly.

Therefore our way forward should aim to make ESG compliant with Panchamrit principles, which is given by India on the path to becoming a Net Zero investor by 2070.