In today's fast-evolving financial landscape, the future of investing lies in ideas that will be centered around sustainability. With Environmental, Social, and Governance (ESG) factors reshaping our understanding of returns and impact, it is evident that the investment world is undergoing a transformative shift. The United Nations (UN) defines sustainability as ‘meeting the needs of present generations without compromising the ability of future generations to meet their own needs’ – a principle now central to investment decision-making.
Investors are increasingly recognising that ESG factors are essential for building resilient portfolios. The KPMG 2024 Sustainability Organisation Survey reveals that 90% of organisations plan to ramp up their ESG investment within the next three years (Source 1). Companies prioritising ESG principles are better equipped to handle material issues that would not only impact the environment and society but also their own operations, such as climate change and extreme weather risks, enhancing transparency and trust between stakeholders. Investing with ESG strategies is not just good practice; it’s a smart business strategy.
Bringing biodiversity to the front
While decarbonisation has long been the focus of the sustainability agenda, biodiversity and water resource management are now gaining increased attention in ESG discussions because of the growing urgency for the society at large to address these issues. The UN’s 2022 World Water Development Report highlighted that 4 billion people face severe water scarcity for at least one month per year, underscoring the resource strain (Source 2). Businesses, especially those in industries like agriculture, manufacturing, and utilities, depend heavily on water for their daily operations, while biodiversity is essential for the health of our planet (Source 3).
Biodiversity and water resources share deep interconnectivity, with each supporting the health and functionality of the other. Biodiverse ecosystems enhance water quality through nutrient cycling, sediment trapping, and pollutant breakdown, while healthy water bodies sustain diverse species and habitats essential for ecological balance and human well-being. This synergy is crucial for maintaining ecosystem services such as flood regulation, water purification, and climate resilience, which are vital for sustainable development and human health (Source 4). Bringing biodiversity to the forefront of environmental, more holistic solutions can be developed to build resilience for communities and the natural systems intertwined with their prosperity.
Business and investment opportunities for long-term sustainability
Companies and investors have significant opportunities to integrate nature-based solutions into their operations and investment portfolios as part of their ESG strategies. For instance, protecting and restoring wetlands and watersheds can offer cost-effective alternatives to traditional water management infrastructure. Businesses can adopt water stewardship practices, reduce water pollution, and engage in sustainable supply chain management to enhance both biodiversity and water resource sustainability. There are also opportunities for investors to invest in innovative technologies for water efficiency, treatment, and reuse, as well as those implementing sustainable aquaculture and green infrastructure projects (Source 5).
Do great, by doing good
Embracing ESG Strategies to address the material issues facing companies may help improve risk management, enhance operational efficiencies, and even achieve cost savings and better talent retention – all of which are key in enhancing shareholder value and brand reputation over the long term. A considerable amount of research shows that companies strong in ESG strategies also had healthy financial performance. According to a report published by The NYU Stern Center for Sustainable Business and Rockefeller Asset Management, 58% of studies found a positive relationship between ESG strategies and financial performance (Source 6).
ESG investments have also shown resilience during market downturns. For instance, during the worst of the pandemic’s impact on the stock market in 2020, ESG indexes outperformed others, thanks to the positive contribution of stocks with high MSCI ESG ratings (Source 7).
Discover the key ESG strategies driving sustainable investing below.
Source: HBS, HKUST
Creating real business value with ESG strategies
Sustainability creates real business value by integrating ESG strategies. Take the example of Hitachi Semiconductor Singapore (HNS) which achieved cost savings through its Energy Saving Solutions project, reducing total energy consumption by 5%, equivalent to a 19.5% reduction in the chilled water plant system's energy use (Source 8). Similarly, PTT Oil and Retail Business, Thailand's state-owned oil and gas company, is capitalising on the growing demand for electric vehicle (EV) charging infrastructure in Asia, planning to install 7,000 EV charging stations by 2030 (Source 9).
Sustainable investments with MTR Lab
As a sustainable innovation investor, MTR Lab Company Limited champions technology investments focusing on ‘smart city’ and ‘sustainability’.
Jing Shi, Head of Investments at MTR Lab
We seek companies and like-minded partners aligned with our goals of sustainable development and innovation, such as Ampd Energy, isBIM Limited Limited and WeMaintain, to build carbon-neutral smart communities together. By reimagining investment strategies through a sustainability lens, we aim to achieve financial success while making a positive impact on the world.
Embrace the future. Invest sustainably. Implement ESG strategies. Create impact.
Learn more about how sustainable investing is becoming a mission-critical strategy for responsible and savvy investors by visiting https://www.mtrlab.com.hk/en/problems-we-solve/ .
