Interested in becoming a top ESG pick?

Six ways you can earn your cut of the responsible dollar - even if your industry happens to be out of favor

by Paul Pierroz

Strategy | Sustainability | Marketing

September 3, 2021 - You have an opportunity to reach sector star status and attract capital even if your industry happens to be out of favor. You might find that surprising. Investors look beyond sector classifications to identify the companies and leaders committed to improving their sustainability standing by setting ambitious goals with plans to back them up. Portfolio managers may be required to select or hold 10% of their portfolio in the mining sector in their quest for diversification and growth.

Not getting lost in the wave of responsible investing requires going on the offense. The most successful organizations will have the best sustainability credentials and marketing, which requires a deliberate strategy to grab and keep investors’ attention.

Let’s assume that a portfolio manager with $300 million available to invest believes that copper prices will rise due to increased global electric vehicle production over the next five to ten years. They would evaluate a set of mining firms. If they wanted to select organizations with a strong sustainability profile, they would look for a top pick with copper exposure. So, how do you improve your profile?

If we step back, several things can improve your sustainability profile. Here are six for you to work on, each with a short explanation.

1. Communicate long-term industry fundamentals. Identify the most critical sources and measures of success for your industry and organization and describe how the market’s disruptive forces and society may change them over the long term. Emphasize the opportunities you see developing as a result.

2. Link your strategies and impacts to these fundamentals. Examine and specify how your organization is positioning itself to take advantage of these trends and the organization’s most critical strategic initiatives. Tell them how these initiatives will result in short- and long-term outcomes that will help you participate in the positive long-term fundamentals.

3. Identify how your business will change to meet these new requirements. Create a vision around what will be different in the future as you work your strategies and realize your outcomes. Tell them how your business will transition over time in the way it operates and delivers value.

4. Quantify the market opportunities and highlight your new capabilities. Develop a story about your new prospects and unique abilities, including what market segments, demographics, and geographies may open up for you. Tell them why and how you can access these opportunities and what share can be created or gained.

5. Present these opportunities in terms of ecosystem impacts. Understand the benefits your organization brings to its stakeholders and society today. Tell them how these impacts will change and improve as you implement your strategies and address new opportunities and capabilities.

6. Reinforce and target investors interested in these impacts. Research the investors and third parties interested in similar markets and learn about how they have supported others to reach their objectives. Tell them about your fundamentals, aspirations, and market potential, emphasizing what sets you and your leadership apart.

There is tremendous value in enhancing your sustainability profile to attract capital and keep these firms interested and invested in your organization. It can also pay to be in the right sector at the right time: rising tides to lift all ships. But, don’t wait for the wave to come in; do your part to improve your profile now.

No one can dispute the significant shift to sustainability investing. Investors and those who provide the finances and protection to your organization are essential, but more stakeholders exist with equally demanding requirements. To stand out from the crowd in our sustainability-centric world, you'll have to go deeper into the stakeholders’ requirements and understand their changing influence and expectations.