Sustainability

Reviewed by Vishnu | Updated on Aug 27, 2020

What is Sustainability?

Sustainability can be referred to as an investment discipline that focuses on the economic, environmental, and social criteria in order to generate better returns in the long-run. Simply put, sustainability focuses on achieving the present investment objectives while ensuring that the same remains for future generations as well.

Understanding Sustainability

Sustainable investing is an investment strategy, which focuses on directing capital to companies/businesses that are looking to combat environmental disasters and climate change while ensuring that corporate objectives are still being promoted.

Unlike most corporate companies where the investment decisions are made in terms of the next quarter's earnings report, sustainability pushes companies to make decisions in terms of decades.

A company starts working towards its sustainability goals once they are issued. These sustainability goals are pretty feasible, and they can range from reducing carbon emissions to proper disposal of physical waste. Once the company is able to achieve its sustainability goal, it can recognise itself as a sustainable company.

What are the Disadvantages of Sustainability?

Consider an example where a particular company decides to offshore most of its production to bring down the cost of labour. Now, even if the company was able to cut costs on its production, it comes with a price - the price of poor safety measures for the workers working offshore. This is the reason why most of the companies are being criticised for their insensitive cost-cutting measures.

Similarly, a company that decides to bring down its short-term costs of proper disposal of physical waste by depositing it in a nearby water body can have a huge impact on the environment. This has resulted in investors refraining from such investments unless the companies ensure transparency in their practices.