Sustainability is on the agenda of serious companies and investors
Companies that do not act on sustainability are directly or indirectly affected by the risks. On the other hand, for sustainable companies, there are many business opportunities to be explored. How? We asked Jacqueline Duiker, from the VBDO (Dutch Association of Investors for Sustainable Development), how investors should be engaged on sustainability matters.
Jacqueline Duiker, Business Development Expert at VBDO (Dutch Association of Investors for Sustainable Development), will be a speaker at CSR Europe’s workshop: Sustainable Value - How are companies engaging investors? Jacqueline engages with corporates and the financial sector to drive their sustainability ambitions forward and develop markets for sustainable investments. She works on developing benchmarks in multi-stakeholder coalitions and has produced several publications on responsible investing, impact investing and climate change.
Why is it important to integrate sustainability in investment decisions?
I’m tempted to reverse this question and ask why not. There are many reasons for integrating sustainability in investment decisions. They can be ethical, or have an intention to achieve positive societal impact, but there are also important financial reasons. Research finds that returns in sustainabale companies are higher. For example, not only do studies find that companies with high ESG scores are on average 3.4% more profitable; there is also evidence that the positive impact of ESG on financial performance is stable over time.
What do you think is needed to achieve more sustainable capital markets?
Firstly, the actors in the capital markets play an important part. Investors need to fully embed sustainability in investment decision making. This requires taking a more holistic and long-term perspective when formulating investment beliefs and evaluating investments. This is not something that comes naturally to the entire investment community, yet. Investors increasingly engage with companies on sustainability issues. However, we often see that this is still a separate type of engagement. I believe investor engagement on sustainability issues should be integrated with their engagement on financial issues.
Companies can also do a number of things, taking sustainability from an operational (cost savings) to a strategic level (influencing industry standards). Governments, regulators and supervisors also have a range of instruments to enhance sustainable capital markets.
Do you think companies and investors have a good level of understanding of the importance and needs of sustainable markets?
I think the issue of sustainability is on the agenda of all serious companies and invesstors. Some of them are more advanced than others. This is partly due to differences in perception between the European and US perception of the fiduciary duty of investors. The Dutch listed companies we engage with are all aware of the importance of sustainability. This is no surprise. All these companies are directly or indirectly affected by the risks if they do not act on sustainability. Of course, there are also opportunities for companies. We urge companies to take fundamental perspective when e.g. adjusting to climate change. This is not only about protecting their own factories, but rather about ensuring the long-term liveability of the areas in which companies operate.
Considering the Sustainable Finance Action Plan developed by the European Commission, do you foresee greater opportunities for sustainable investing?
Yes, I believe so. The EU will make 20% of its budget directly climate-relevant, channelling investments into sustainable sectors and projects. The Action Plan also entails the creation of standards of what ‘sustainability’ means, the so-called taxonomy, labels for green financial products and benchmarks on sustainability. These can be very useful for investors. Furthermore, the Plan stimulates embedding sustainability risk in market pricing and prudential requirements. The Action Plan explicitly defines sustainability considerations as part of the fiduciary duty of investors. It will probably take some time before all Actions are implemented, but I do expect some kind of regulation to follow. This will certainly affect all actors in the capital markets.
Jacqueline will be joining us on the workshop, with all her experience in responsible investing, to provide participants with insights into how investors are integrating sustainability in investment decisions and highlight key expectations towards companies.
The CSR Europe’s workshop “Sustainable value - How are companies engaging investors?” takes place on 21 November 2018, Brussels.