Creating impact is the best investment you can make

The future of business

Companies like Unilever, Danone or others are the future of business since they already combine the social and environmental impact into their core business. Consumers, workers and investors and demanding more integration of this issues and the ones that not adapt will be the loosers.

The introduction of environmental and social criteria on the funding of the economy are criticial to achieve the goal established by the Intergovernmental Panel on Climate Change (IPCC) aligned with limiting global temperature rise to 1.5°C above pre-industrial levels. The business benefits of science-based climate action are clear and the leading companies are already compliant will be best-placed to thrive as the global economy undergoes a just transition to a net-zero future by 2050.

Therefore projects which already are aligned with social and environmental criteria are an excellent investment opportunity. We can consider some of these factors:

• Consumers: More than 2/3 of millennials say according to a Nielsen study (Sustainabilty Imperative) that are available to pay more for products that are sustainable. We believe that products with unnecessary plastics will be dropped from use. On the other hand consumers are demanding more local food that has less environmental footprint. Food retailers will need to adapt its supply chain in order to meet customers demand on sustainability. Amazon bougth Whole Foods (which exclusively sells products free from hydrogenated fats and artificial colors, flavors, and preservatives) for $13,5 bn not because of its environmental concerns but because it’s an excellent business.
• Talent: a new report (Purpose at Work Global Report – Linkedin) shows that 75% of millennials wat to work in companies with social or environmental purpose which has further goals than shareholders profit. Talent competition to attract and retain the best workers will go beyond company’s financial resources but for its purpose and mission.
• Investors: Millennials will be the heirs of one of the largest wealth transfers of all time ($31tn till 2020) and their investments decision will have social and environmental guidelines. Blackrock’ CEO (largest asset manager in the world) has wrote annual letters mentioning this concerns.
• Opportunity: Investors and entrepreneurs are always looking to the next trend and opportunity and there is an opportunity regarding the United Nations 17 Sustainable Development Goals, which is a market of $10tn. This is a huge economic opportunity for those who can tackle issues as access to education, food waste reduction, responsible consumption and climate change.

The math is easy if:

• Consumers want impact only the companies that will provide it will be the winners.
• Talent want impact companies will have to integrate it into their way of working to assure that they can attract and retain talent with high rates of productivity.
• Investors want impact the cost of capital will be less to companies that will deliver this demand into their business model.

It’s not new that companies that will prevail in the future are the ones that are able to integrate into their business model social and environmental impacts. But this future is know and the companies that can’t adapt will not be doing business in the long run because consumers, talent and investors will do their choice.

This article was adapted from the Portuguese version of: observador.pt/opiniao/criar-impacto-e-um-excelente-investimento

António Miguel have 32 years and is co-founder and managing partner of MAZE, Calouste Gulbenkian’ impact investing company that Works with social entrepeneurs.