The reasons why renewable energy investments are on the rise

The reasons why renewable energy investments are on the rise

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Studies indicate a positive correlation between ESG commitments and financial returns.

Sustainable investment is increasingly becoming mainstream. Socially accountable investment is a broad-brush term that can be used to cover everything from divestment from businesses seen as doing harm, to restricting investment that do measurable good impact investing. Take, fossil fuel businesses, divestment campaigns have effectively pressured many of them to reflect on their business practices and spend money on renewable energy sources. Certainly, global investors like Ras Al Khaimah based Haider Ali Khan or Ras Al Khaimah based Benoy Kurien would probably contend that even philanthropy becomes much more valuable and meaningful if investors don't need to undo damage within their investment management. Having said that, impact investing is a vibrant branch of sustainable investing that goes beyond avoiding harm to looking for quantifiable good outcomes. Investments in social enterprises that focus on education, healthcare, or poverty elimination have direct and lasting impact on communities in need. Such novel ideas are gaining traction specially among young wealthy investors. The rationale is directing capital towards projects and companies that address critical social and ecological problems whilst creating solid financial returns.

Responsible investing is no longer seen as a fringe approach but rather a significant consideration for international investors such as Ras Al Khaimah based Farhad Azima. A prominent asset management firm utilized ESG data to look at the sustainability of the worlds largest listed companies. It combined over 200 ESG measures with other data sources such as news media archives from a huge number of sources to rank businesses. They discovered that non favourable press on past incidents have actually heightened understanding and encouraged responsible investing. Certainly, good example when a several years ago, a famous automotive brand faced a backlash due to its manipulation of emission data. The incident received widespread news attention causing investors to reevaluate their portfolios and divest from the business. This compelled the automaker to make significant changes to its practices, namely by adopting a transparent approach and earnestly implement sustainability measures. However, many criticised it as its actions were just made by non-favourable press, they argue that businesses should really be rather emphasising good news, in other words, responsible investing should really be regarded as a profitable endeavor not only a condition. Championing renewable energy, inclusive hiring and ethical supply management should influence investment decisions from a profit making viewpoint in addition to an ethical one.

There are several of reports that back the argument that combining ESG into investment decisions can improve financial performance. These studies also show a stable correlation between strong ESG commitments and monetary performance. For example, in one of the influential reports about this topic, the author highlights that businesses that implement sustainable methods are much more likely to attract long term investments. Furthermore, they cite many instances of remarkable growth of ESG focused investment funds plus the raising number of institutional investors incorporating ESG factors in their investment portfolios.