ESG investing is a trendy way to invest taking financial and non-financial factors into account. Some call it “woke capitalism” but it is more than a political agenda-driven way of making money. ESG investors seek to make a long-term positive impact, benefiting society through their investments by addressing issues such as climate change and racial inequality.
ESG investors don’t solely focus on financial gains. According to Investingstrategy.co.uk, “for today’s young investors, making money is no longer the only priority.” ESG investing represents a socially and ethically sensitive approach, looking to defeat the downsides of unbridled capitalism.
Plastic waste has long represented a target and opportunity for environmentally conscious investors. Plastic waste recycling presents many challenges in need of solutions. Instead of passing on the plastic waste problems to countries they perceive as belonging to the third world, organizations must now find real solutions. And where a search for real solutions takes place, investment opportunities abound.
What do Impact Investors Seek?
Emerging markets offer many opportunities ESG-wise. Impact investors value sustainable development goals like:
- Innovation, infrastructure, and industry-oriented investments
- Investments in responsible production and consumption
- Partnerships for attaining sustainable development goals
Plastic waste offers opportunities in emerging markets for scalable innovation, infrastructure, and organizations. For individual ESG-oriented investors, investment funds focusing exclusively on SRI (Socially Responsible Investing) may be the answer.
Screening is one of the basic SRI strategies and it often represents a considerable hurdle for new investors. According to Fxexplained.co.uk, “screening describes the inclusion or exclusion of corporate securities in investment portfolios based on social or environmental criteria.”
For a retail investor, screening is a tall order requiring extensive research and information processing capabilities. ESG-focused investment funds handle screening, allowing investors to gain a balanced exposure to socially and environmentally responsible investments.
Therefore, what ESG investment funds want and value and how they think are relevant to what individual impact investors think and need.
Asian countries have been at the center of the global plastic waste trade and not for the right reasons.
Savvy ESG investment funds look for opportunities in the Asian markets. The Philippines, Thailand, India, Vietnam, and Indonesia are all countries that need urgent solutions for their plastic waste problems. Other Asian countries may present similar opportunities.
Investment funds may focus on certain aspects of the plastic value chain, but every one of its aspects carries ESG investment opportunities.
The most profitable ones that make significant impacts don’t shy away from innovative materials, deep tech, and advanced recycling technologies.
Organizational Management in ESG Investing
ESG investment funds look for alignment in the leadership ranks of the organizations in which they invest. The leaders of these companies must share their socially and environmentally conscious views and goals. From the perspective of an investment fund, alignment means:
- An aligned long-term organizational vision
- An organizational strategy aligned with this vision and the requirements of ESG investing
- The ability to execute and achieve the ESG-aligned goals
Other attributes ESG investment funds look for in businesses are:
- Solid financial fundamentals
- A well-established track record in building and scaling businesses
Assessing Impact and Sustainability
ESG investment funds use several criteria to assess the investment worthiness of the companies they include in their portfolios. Such criteria are:
- The co-investment capabilities of the organization
- Its commitment to preventing and reducing plastic pollution
- Its commitment to reducing greenhouse gas emissions
- The benefits and social value the organization creates for local communities
- The contribution of the organization to the principles of circular economy
Currently, no standard procedures exist for assessing the ESG investment worthiness of organizations dealing with plastic waste. Many ESG investment funds are willing to share their methodologies, insights, and data to help others refine their metrics.
How and Why Do Organizations Fail to Attract ESG Investments?
ESG investment funds and retail investors may lose interest in companies for two reasons.
- Lacking the required financial means may cause organizations to ignore details and overestimate their ability to meet valuation expectations.
- Some organizations lack team capabilities and aren’t ready to absorb ESG investments.
Another advantage ESG investment funds have over retail investors is that they can work with organizations that fall short but show potential. Funds can help such companies develop sustainable business plans, identify capacity problems, and navigate the scaling process.
ESG investment funds facilitate the meeting of mission-aligned investors with ESG-oriented companies for mutually beneficial partnerships that also benefit local communities and the greater society.