How can you encourage investor involvement in sustainability initiatives?

Eine Erfahrung die wir gesammelt haben ist das natürlich die Rendite für einen Anleger von interesse ist .. es geht nämlich auch um nachhaltiges Investieren. Jedoch ist die Key-Message das Nachhaltigkeit nicht unbedingt ein reiner Kostenpunkt ist.. Nachhaltigkeit kann ein deutlicher Businesstreiber sein, durch jenen sich das Geschäft eines Unternehmens fundamental neu ausrichtet - Zukunftssicher.. somit sollte man Nachhaltigkeit auch als Chance betrachten!

Sustainability Vs Shareholder Value is a mismatch If we talk about Sustainability, it can't be separated from Shareholder Value. Sustainability is principally more focused on long-term value creation, while Shareholder Value is more focused on short-term value creation. This is a mismatch because Shareholders request investment returns like cash dividend now, while sustainability can't provide returns in the short-term period because sustainability is for more long-term value creation. Until today, there is no optimal solution to bridge the mismatch. It is very hard to find the investors who are willing to receive investment return in the long-term period because investors need quick money circulation to reinvest in other portfolios.

Investors are only one stakeholder in the value chain - customers and community expect investors to act ethically and socially responsibly, in order to maintain their social licence to operate. A comprehensive materiality process run with investors will demonstrate that failure from them to act on current and emerging social and environmental issues, will impact future financial returns. Similarly, investors have an opportunity to transition their products and services to sustainable investments, and unlock new investment and business opportunities focused on circularity, biodiversity, social impact, renewable energy… and more.

It is well known that an unprecedented generational wealth transfer is underway: the coming decades will see $73 trillion - more than half overall U.S. wealth - transferred down generations. This will significantly increase investor demand for products and strategies that focus on environmental and social issues. A recent report by Morgan Stanley found that nearly half of U.S. investors (45%) are interested in investment strategies that advanced LGBTQ+ inclusion

If investors "need" to encouraged to be involved in sustainability initatives, then they've been under a rock, climate change is here, right now, and every investment has to include sustainability - BY DEFAULT!

Communicating your sustainability vision is vital. Show investors how it intertwines with your business strategy and their values. Use data to make your case: demonstrate how sustainability drives growth, innovation, and resilience. Leverage diverse platforms - from annual reports to social media - to paint a vivid picture of your sustainable journey and its benefits. This isn't just about sharing goals; it's about showcasing a path to shared value.

Set lofty goals, but also be practical. Divide the work into the low-hanging fruit, the harder-to-achieve, and the real moonshots. Once you start building momentum, identifying the right people and expertise to help achieve a vision, and create goals that are both aspirational as well as achievable (i.e., aspirational goals with achievable targets), it can lead to cultural change. And it comes from both the top and the bottom – employees can demand it, and C-suite must prioritize it.

One thing is to communicate the economic values of a company and another thing is to communicate sustainability or, even more importantly, to communicate impact or purpose. The communication metrics are completely different and above all many of these metrics have not yet been "invented". Not that they don't exist today, but it is an extremely young subject and above all, at this stage, still very subjective. The communication of impact must mediate between two dimensions that are not easy to keep together today: the enormous amount of data and interpretations and the need to make oneself understood in a clear way and, above all, in a way that allows to engage attention and conviction based on a true sense of trust.

Communication about sustainability is quite hard for investors since the objectives of investors are different with the objectives of sustainability. Some investors need short-term return for their investment and also sometimes investors need a quick payback period, while sustainability's return are available in the long-term period and long-term payback. Why investors need short-term return because they need to reallocate their fund to other portfolios. Given this gap, it will create hard communication to the investors. However, there is still a hope for sustainability if the business is also sustainable in the future, this will attract some investors when we convey the message of sustainability.

Inspire investor involvement in sustainability by seamlessly integrating your vision into business strategy, and showing them the impact you are targeting. Tell your story of impact and sustainability in an interesting way not just report. Use different types of media and channels like social media too. All this to vividly portray your journey and its benefits. Highlight the tangible advantages, forging a powerful link between financial returns and positive societal impact. Engage investors emotionally, underscoring the dual advantage of profitability and meaningful contribution to societal well-being. Make them feel the impact, not just see numbers.

Beyond communication, collaboration is crucial. Engage investors in sustainability dialogues. Invite their insights and co-create solutions. This isn't a one-way street; it's a partnership. Through collaboration, you foster trust and mutual understanding, making sustainability a joint venture. It's about turning investors from spectators into active participants in your sustainability narrative.

Design sustainability solutions that are delivering short-term and long-term growth for the business. Demonstrate impact in terms that are aligned with investors priorities and strategy.

Invite investors to contribute feedback, insights, and ideas, engaging them in meaningful dialogues and consultations with various stakeholders. By fostering a collaborative environment, companies can go beyond communication and co-create, co-invest, and implement sustainability projects. It benefits the business and addresses broader societal challenges. Unilever has successfully collaborated with investors to implement innovative sustainability initiatives - Sustainable Living Plan. This collaborative approach has led to measurable improvements in environmental impact and societal well-being, showcasing the tangible outcomes of such partnerships.

Trust is key. Investors want to know that you will do what you say and more importantly have done what you said you laid to do. Also, relationship is like building a Lego set. It’s a lot of small interaction leading to something strong and lasting!

One of the challenges for sustainability is business viability. Even ESG has been implemented properly, but if the business is not viable in the future, investors will never jump the boat. From my opinion, to build the trust from investors, we need to show them the benefits of sustainability for future generations and also convince them that the business related to sustainability is viable. If we cannot convince that the business is viable, your communication cannot attract the investors. Because, in the end, investors need a return, we cannot deny it. If we introspect, If we were investors, we would request a quick return also.

Align with Sustainable Development Goals (SDGs) and demonstrate how sustainability initiatives align with global frameworks such as the UN Sustainable Development Goals. This can provide a universally recognized reference point for investors who prioritize contributions to broader societal and environmental goals. For investors primarily concerned with financial returns, emphasizing the long-term economic advantages of sustainability initiatives will help by showcasing case studies or industry examples where sustainable practices have led to improved financial performance, risk mitigation, and increased shareholder value.

In the circle economy, it's clear that ethical choices often lead to better business outcomes. By showing investors how sustainability reduces risks and can yield higher returns, we align our planet-friendly goals with their interests. It's also important to address their concerns practically, offering concrete solutions and support. This collaborative approach not only furthers our sustainability agenda but also strengthens investor relationships, creating a more resilient and forward-thinking business environment.

A key aspect of persuasion is emphasizing risks with numbers. There are a variety of risks associated with sustainability – starting with the fact that if sustainability initiatives are not invested in now, it's only a matter of time until climate risks affect their business, from supply chain disruptions due to climate disasters, to the labor force being displaced from their homes. Look into reliable sources of climate risks, such as Forrester. Then, when risks are sufficiently displayed, explain the upside of investing in sustainability efforts & how to mitigate the negative effects of climate risk. Consider hiring an ESG & DEI-focused risk advisor who understands the complicated relationship between climate change & minority populations.

Before we convince the investors, we need to convince ourself first for the sustainability project as to whether the business is viable or not. If the business is not sustainable, we cannot convince the investors to act because it is better if we introspect first, if we were investors like them, would you be willing to receive a slow-paced dividend from what you have invested? because sustainability project cannot provide a quick dividend for investors even sometimes no returns at all. As a normal human, we are not willing to receive a slow-paced dividend from what we have invested.

To elevate the effectiveness of the 'Investor Sustainability Council,' you could introduce a rotating chair position. This role, changed annually, would allow different investors to guide the council's focus, ensuring a variety of perspectives are considered and prioritized. Additionally, hosting an annual 'Sustainability Innovation Challenge' within the council could stimulate creative problem-solving and active engagement, further strengthening the shared commitment to sustainability.

Investors are not the only stakeholder group a company should focus on. One in two Gen Z office workers look at Sustainability reports when researching a job according to a study published by KPMG in January 2023. And according to a Bain & Company study of 4,000 U.S. consumers in June 2023 found that 30% of Gen Z would reject a brand because of the company’s inability to share its DEI track record.

Sustainability is a tough project for investors. Since there is different objective between investors and sustainability. Investors need returns as quick as possible, while sustainability cannot provide a quick return, also sometimes no returns at all. For me, if we talk about sustainability, it does not cover only ESG, but also cover the sustainability of business itself because sustainability and business viability cannot be separated. Once business is not viable, it means no fund, no fund means that the sustainability project will cease. In the end, funds will count.

In my experience from both the corporate sustainability side and having developed the ESG strategy across asset classes at a large asset manager, one of the key things to consider is financial materiality. While investors may have ESG commitments, they're likely still revolving around financial materiality of ESG issues, due to their fiduciary duty. By helping your investors understand how your ESG initiatives are impacting the success of the business, it will show the investors that you understand their goals and motivations and that you are prioritizing the best activities within your organization.

Make sustainability an outcome of changing the way you do business that is commercially viable. Not a problem you have to solve and a check box to tick. Communicate it as such. This shows you are a business with ingenuity built in with an ability to innovate and adapt not just firefight.

One good approach to engage investors is to introduce them to the Planetary Boundaries and Social Foundation frameworks as a pivotal approach to shape their sustainable investment strategies. These frameworks outline environmental thresholds and societal needs, offering investors a roadmap to navigate risks, identify opportunities, and align financial goals with positive planetary and social impacts. Integrating these frameworks into investment decisions isn't just responsible—it's a pathway to a sustainable and prosperous future.