Dmitrii Khasanov: Investments in Sustainable Development, ESG and Long-Term Growth

ESG (environmental, social and corporate governance) is no longer just a fad; it is a serious factor that has a significant impact on economic and social development. However, it should be borne in mind that the implementation of ESG is far from the cheapest process, so projects that bring only costs should not be considered. Instead, it’s worth thinking about how to make ESG commercially profitable.

Investors and investment departments of large companies are increasingly interested in ESG. According to a McKinsey survey, about 85% of investment directors said that ESG is one of the main factors in their investment decisions. About 60% of respondents also check their entire portfolio for ESG connections, and about 80% evaluate individual companies’ positions in terms of how ESG affects projected cash flows.

Dmitrii Khasanov, the founder of Arrow Stars investment fund and a digital marketing guru, explained why ESG-projects are so attractive to investors.

The Modern ESG Idea

The main thing for an investor is to invest their money in such a way that they not only bring dividends, but also create long-term value. That is why the share of investments in so-called sustainable development projects is growing, especially those that meet environmental, social and managerial criteria. Today, ESG has become a philosophy, an idea that unites most representatives of large businesses.

The essence of this idea is simple: companies have a significant impact on society and the environment and must be responsible for it.

The ESG agenda is a set of diverse initiatives, including better working conditions for employees (this concept includes the introduction of environmentally friendly working methods, loyal customer service, the development of long-term relationships with suppliers, fair payment of taxes or work to minimise environmental impact.

The idea of responsible capitalism is not new: we can find something similar in the works of economists a century ago. The idea of responsible capitalism is not new: we can find something similar in the works of economists a century ago. However, in its modern form, it took shape around the time of COVID-19, when the whole world suffered from the deadly disease.

Then there was an understanding that problems such as global warming or a pandemic would affect everyone, and it was better to set aside part of your profits in advance to prevent world-wide tragedies.

The ESG strategy during and after the pandemic has produced positive results. Companies that have supported their employees have earned their loyalty and improved their corporate reputation.

Profitable Sharing

Investing in companies with ESG becomes more and more popular. Several factors contribute to this.

One of the reasons was the growing awareness of the population about global issues. More and more people are interested in the topics of climate change, social inequality or corporate governance issues. People understand how these problems are interfering with their lives right now. Investors see a growing interest in these topics and want to invest money in their solution.

The other reason is also related to money. The study showed that investing in ESG can lead to an increase in the number of potential customers. Companies that use effective ESG methods often earn more, take fewer risks, and are more resilient to economic downturns.

In addition, changes in legislation and advanced training in expertise have divided ESG factors into the most important for investors. New reporting standards make cooperation with such companies easier and more accessible.

Sustainable Investments

Dmitry emphasises the following advantages of ESG-investments. First of all, investing in ESG funds contributes to environmental sustainability. ESG companies that prioritise resource conservation, reduce emissions, and adopt eco-friendly practices play a crucial role in improving the health of the planet.

Secondly, investments in ESG revitalise social and labor relations in companies, resulting in an improved work environment and resulting in more efficient work and higher profits.

Thirdly, investors give money to understandable and predictable companies. The principles of ESG include transparent governance, ethical decisions and reliable management structures. In other words, by financing ESG companies, the investor gives money to honest, transparent structures that are more likely to bring him profit. And the last one, investing in ESG can lead to improved financial performance.

Companies that use effective ESG methods often receive higher valuations, lower the cost of capital, and increase investor confidence. There is a very simple explanation for this. These companies are often better managed and adapt faster to changing market conditions. They tend to have less volatility and more stable profits.

Due to this, such companies are more protected and easier to endure periods of economic uncertainty (such as a pandemic, for example). In addition, investments in ESG can reduce the risks posed by environmental disasters, regulatory fines, and reputational damage. ESG is already an established brand. By avoiding companies with low ESG scores, you can reduce the threat to your investments.

Dmitrii Khasanov states “By investing in ESG funds, you can contribute to positive change while benefiting financially. This alignment creates a sense of purpose and satisfaction when you know that your investments are beneficial”.