Much has been made of the recent European Green Deal and its impact on business activities and focus. But how will it affect investment opportunities? Ed Read Cutting, Director of The Fry Group’s Belgium office, considers how the future of investing may look in the light of changing legislation.
Last month the European Parliament voted to support the European Green Deal; a set of policies with the aim of making Europe carbon neutral by 2050. If successful, the Deal will create the world’s first carbon neutral continent, and has been hailed by Ursula von der Leyen, President of the European Commission, as Europe’s ‘man on the moon moment’ in its significance and scope.
Ultimately the Deal illustrates once again that corporate social responsibility when it comes to climate change is becoming central to the agenda – for the general public, shareholders, and now governments and policymakers. It seems likely that other countries and governments around the world will also begin to adopt similar approaches.
The outcome is that the trend for socially responsible investing will continue to grow in both pace and importance. Consequently, companies will have to incorporate a responsibility in what they do and how they do it into their core strategy, as well as adhere to new targets and legislation across their business operations; considering the environmental impact of their actions, products and services and their ethical position on a range of topics linked to their sector and beyond.
Signs that general sentiment is beginning to make a strategic and operational difference are being seen in a number of sectors. Earlier this month, the National Trust – the UK’s independent charity and membership organisation for environmental and heritage conservation – announced it was ending its long running year partnership with Cadbury Chocolate. The decision to end the 13-year tie was driven in part due to member’s concerns over Cadbury’s use of unsustainable palm oil in its products, and the subsequent impact of the deforestation it causes.
Furthermore, a recent ING survey illustrated how consumer spending power is affecting companies bottom lines with almost 4 in every 10 consumers now opting not to buy from companies which they deemed ‘environmentally unfriendly’.
As a result it is clear that any organisation’s business practices – particularly in the light of its environmental and social impact – will factor in its appeal to investors, and as a consequence, its share price. It’s no surprise that in the future investment opportunities will be driven more and more by how ‘clean’ a business’ operations really are.