How can you encourage investor involvement in sustainability initiatives? (2024)

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It is essential to understand investors' interests and points of view regarding sustainability. Engage shareholders on what sustainability issues matter most to them and where they want to see progress.Here is how you can encourage someone focused on financial returns. Share how sustainability drives risk mitigation, cost savings, brand value, and future-proofing of the company. The stronger the ROI, the more interested investors will be.

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Sustainability Vs Shareholder Value is a mismatchIf 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.

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.

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.

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.

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.

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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.