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Build A Sustainable Investment Strategy Post COVID-19

February 3, 2021

COVID-19 has rocked the world, further exposing the already fragile relationship between humans and the natural environment. Some reports suggest global carbon emissions may have dropped by 17% due to lockdowns and stay-at-home orders, but based on the forecasted economic bounce-back, this could be a fleeting change.

In a bid to establish long-term environmental change, 115 companies worldwide have urged governments to align their COVID-19 economic responses with the latest climate science. Despite future-uncertainty, could this be a sign of an opportunity for sustainable investments to help governments and businesses re-build more environment-friendly ways of working? 

As sustainable investing continues to surge, most money managers using environmental, social and governance (ESG) consider climate change to be the leading criteria for where they choose to invest. Accounting professionals have the power to lead the way and help clients pivot their business models to support climate change and contribute to a more sustainable environment.

Continue reading to discover how to help your clients leverage business planning opportunities and improve their sustainability in a post-COVID world.

How to Make Sustainable Investment Decisions in the ‘New Normal’

In a world concerned with the looming effects of climate change, green energy and sustainable power generation are key areas of consideration for modern businesses. Below we’ve outlined what your clients should look for in sustainable funds and how they can make strategic investment decisions for their organisation.

Choose Companies with Long-term Low-carbon or Fossil-fuel-free Commitments

Fossil fuels still contribute to 75% of the world’s total GHG emissions. As a business leader, it’s important to note that the standards between fossil-fuel free and low-carbon are different when it comes to creating a sustainable investment strategy post-COVID-19.

Only businesses with a portfolio of 0.00% in the energy sector can consider themselves “fossil-fuel-free”. Committing to complete fossil-fuel-free investments means excluding working with energy companies that extract, process, use, or distribute coal, oil, gas, and carbon reserves.

On the other hand, “low-carbon” companies might still make investments in fossil fuels from time to time, but they will also invest in energy companies who take climate change action. Businesses with low-carbon portfolios still evaluate carbon emissions and the overall environmental effects of investments.


Sustainable Funds Have High ESG Performance Ratings 

Environmental, Social, and Governance (ESG) are three central pillars for measuring and assessing the sustainability and societal impact of an investment in a business. ESG ratings allow organisations to better determine future financial performance as well as encourage transparency.

Generally, the more information an investment fund discloses about environmental and sustainability practices, the higher their ESG rating score will be. According to the Harvard Business Review, investors and board members have become increasingly “ESG fluent” over the last few years.

If you’re an organisation looking to craft a sustainable investment strategy, the criteria outlined by ESG performance ratings are an excellent tool for your clients to assess their eco-friendly performance in-line with key stakeholders' expectations. 

Hermes was the first company in the world to offer customers the option to send parcels in carbon negative, 100% sustainable making bags. Their new mailing bags use GreenPE to allow customers to ship packages without consuming fossil fuel reserves or impacting the environmental carbon footprint.

The Baillie Gifford Positive Change fund is another excellent example of an investment fund taking active ownership over their sustainable investment strategies and considering how their decisions impact the entire planet. Receiving five stars from 3d Investing, this top-rated fund aims to deliver attractive long-term returns and positive change by contributing towards a more sustainable and inclusive world. 

 

Embrace Innovative Sustainable Technology 

Between 1990 and 2018, the EU reduced greenhouse gas emissions by 23% while growing the economy by 61% due to green energy and technology investments. 

Meeting green business objectives requires high levels of investment in green and low carbon energy technologies, like wind turbines or air-source heat pumps. But, technology also has the power to help take a company beyond just the surface-level changes and is a great indicator of green business practices in action.


When forming sustainable investment strategies, some of the innovative technologies for your clients to keep their eye on include:

  • Cloud-based computing. Cloud-powered solutions host numerous virtual servers on a single, powerful server. On top of being more technologically efficient, cloud platforms also allow businesses to reduce the space needed in an office or factory that would have once housed servers to store data. Some companies, like Amazon and Google, keep their cloud servers in cold countries and underground to reduce energy bills and actively contribute towards being a greener and more sustainable company by buying their electricity directly from green energy suppliers. 
  • Advanced data analytics. Companies are increasingly collecting and using data to create valuable and intelligent insights to monitor their organisation’s energy infrastructure. Data-driven insights about energy performance allow modern businesses to optimise their energy usage and improve energy efficiency with low-carbon technology recommendations. These green technologies include LED lighting, advanced heating and cooling solutions and energy control systems.


COVID-19 has allowed companies of every shape and size to rethink strategies and implement new technologies to reduce their business's carbon footprint. Accounting professionals can deploy their skills to help clients redefine their approach to harness business planning opportunities and sustainability to increase efficiency and boost their ESG ratings.

With so much uncertainty caused by the pandemic, it’s never been more important for companies to look towards the future and make sustainable investments. Accountants have the opportunity to perform a huge variety of crucial tasks that allow your clients to foster a sustainable approach going forward. As the pandemic continues to cause uncertainties, you can apply your expertise to help your clients make smart choices in the ‘new normal’.

Learn How to Invest Sustainably with INAA

Here at INAA, we connect accounting firms who aim to deliver quality professional services around a shared vision to make global business personal, and take personal business global. With every industry change, our collaborative association of international businesses is committed to being a part of the conversation around auditing and accounting.

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