Sustainability is a necessity
The time for talking is over. Companies no longer have a choice and must act sustainably. Sustainability as a growth engine offers huge opportunities. As an investor, it’s in your interests to monitor these developments closely.
An important role for companies
The science is clear: our society must become more sustainable if we are to ensure that our planet remains habitable for ourselves and future generations. Quite simply, there is no other option. Companies have an important role to play in this transformation. A great many of them are having to adapt their processes, services and products, in some cases radically.
Sustainability has evolved in recent years from something that is nice to have to an absolute necessity.
Filip Ferrante - General Manager Corporate Sustainability
“Among other things, climate change has made the urgency very tangible. Sustainability has become a top priority for many companies. It’s no longer a free choice driven by the engagement of business owners or senior management, or by a focus on reputation.
Companies wishing to be successful in the future have no choice but to put sustainability at the heart of their business operations. The pressure of public opinion and the more stringent directives being issued by various authorities, and especially Europe, can no longer be ignored.”
Sustainability in the DNA
Sustainability is a direction of travel that companies must follow, but according to Filip Ferrante, it’s best to make a virtue out of necessity.
“That way you can guarantee continuity for the long term”, he says. “Companies which have sustainability in their DNA generally focus heavily on innovation, have a strong reputation and are attractive employers.
New employees, primarily young people, increasingly see sustainability as a crucial condition in their search for a potential employer.”
It even goes so far that companies which fail to embrace sustainability could find their very continuity under threat in a few years’ time. Filip Ferrante: “They will find it increasingly difficult to source finance and are therefore in danger of pricing themselves out of the market.”
“Green is the new digital”
Making our society and our economy greener demands a root and branch transformation. So much so that Johan Thijs, CEO of KBC Group, has said that green is the new digital.
“Just as the digital revolution ushered in a totally new economy, we are convinced that the sustainability journey will create new opportunities”, says Jürgen Verschaeve , Chief Investment Officer at KBC Asset Management. “
New business models will emerge, as well as innovative service models and thus new income sources.”
According to Jürgen Verschaeve, the need for a transition is more urgent in some sectors than others. Cue the example of energy producers. Jürgen Verschaeve: “Their operational landscape now looks entirely different. Legislation is changing continually; prices of fossil fuels are rising; better solutions are emerging for energy storage; and there are more options for decentralised energy generation, for example using solar panels or wind turbines.”
The growth in local energy generation is changing the whole business model of this sector and demands a transition. “The big energy producers have for a long time enjoyed and profited from a stable business model”, says Jürgen Verschaeve. “That has now been disrupted by the emergence of smaller, decentralised energy systems. Previously, they made up only a small part of the energy market, but they are now growing rapidly. If the traditional oil and gas giants want to stay in the game, they will have to adapt.”
To help support this transition, KBC excludes investments in fossil fuels from its sustainable and socially responsible investment funds. Excluded sectors include extraction of gas, coal, shale oil, shale gas and drilling operations in the Arctic. Only utilities companies which are committed to generating reliable, safe, low-carbon and energy-efficient electricity are eligible for inclusion in sustainable and socially responsible investment funds.
All in it together
According to Jürgen Verschaeve, the energy sector is just one of many examples. “It’s a good example because these companies are directly linked to climate change”, he says. “But let’s not be under any illusions: every single sector will have to embrace sustainability. We’re all in it together.”
“To create a genuinely more sustainable world, we need companies that operate within the limits of what the earth can sustain. Those are companies that are not only aware of their economic role, but which also reflect on how they can act as an ecological and social fulcrum within society and their sector.” That counts as a big challenge.
KBC is deliberately focused on socially responsible investing. Its ESG funds invest exclusively in countries and sectors which lead the field on the environment, social policy and good governance.
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This article is informational only and should not be considered investment advice.