Good Investments

People are increasingly judging them on social outcomes as much as monetary returns

Nobel awards are unarguably the world’s most famous honour. And for over a century, they’ve been funded by Alfred Nobel’s profits from explosives and armaments. Does that make the weapons industry “good”? It’s not a trick question. Two major wars are on right now, and investing in weapons makers could net you market-beating returns, but would you do so? It’s quite likely that you have scruples against backing the production of killing machines. Likewise, as an investor, you might not want your money going to businesses that involve cruelty to animals, or the clearing of jungles, or vast greenhouse gas emissions, or sale of “sin goods” like alcohol and tobacco. 

Mature markets like US saw room for such conscientious investing last century. By 1995, investments driven by ESG – environmental, social and governance – concerns in US added up to $639bn. By one estimate, global ESG investments today are worth over $39tn, and expected to touch $180tn by 2034. Clearly, investors are voting with their money to mould the world into a better, safer, more equitable place. While India’s ESG market is relatively small, the past month has seen two significant developments. June launched the BSE Saatvik 100 Index that excludes firms dealing in alcohol, gambling, etc. July followed with Nifty500 Ahimsa Index that tracks firms promoting ethical treatment of animals.

This is a small start, but given how much Indians care for saatvik values, including ahimsa, more such investment initiatives are bound to follow. Especially when returns on ethical investments tend to match or even surpass those on “indiscriminate” investments. In fact, India’s ESG investments are growing at 28% annually, and estimated to touch $6tn in 2033. By influencing corporate policies and behaviour, this can also help India achieve its sustainable development goals. In a market economy, this kind of ethical, responsible or sustainable investing is as important as your democratic right to vote. It recognises the fact that “value” is not always monetary, and reversing global warming, or ending bonded labour, is more important. That’s the “blended value” of a business – profit plus social good. And it’s how bottom lines ought to be written and read.

https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2017/11/impacting-investment-lexicon.pdf

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