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Good for the planet, good for your portfolio: the benefits of sustainable investing

04 Jan 2023

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Key Takeaways:

Benefits of sustainable investing

  • Provides the potential for long-term outperformance
  • Aids in diversifying investors’ portfolio and potentially reduce risk
  • Opportunity to influence the behaviour of companies and promote positive change
  • ESG investing has been notoriously difficult to access, but KLDX is changing that notion

Sustainable investing, also known as socially responsible investing or environmental, social, and governance (ESG) investing, is a way to align your investment portfolio with your values and make a positive impact on the world. But beyond just feeling good about your investments, there are several compelling financial reasons to consider sustainable investing as well.

One key benefit of sustainable investing is the potential for long-term outperformance. Studies have consistently shown that companies with strong ESG practices tend to have better financial performance over the long term. This may be because these companies are better able to manage risks and opportunities, attract and retain top talent, and maintain strong relationships with customers and stakeholders.

In addition, sustainable investing can help to diversify your portfolio and potentially reduce risk. Environmental and social issues can have a significant impact on a company’s financial performance, and by considering these factors in your investment decisions, you can potentially mitigate these risks.

Another benefit of sustainable investing is the opportunity to influence the behavior of companies and promote positive change. By investing in companies that prioritize sustainability and social responsibility, you can encourage these practices and contribute to a better future.

But perhaps the most compelling reason to consider sustainable investing is that it is becoming increasingly mainstream. A growing number of investors are recognizing the importance of ESG factors and incorporating them into their investment strategies. As a result, companies with strong ESG profiles may be better positioned to attract investment and outperform their peers.

It’s important to note that sustainable investing is not a one-size-fits-all approach. There are a variety of options available, from mutual funds and exchange-traded funds (ETFs) that focus on specific ESG criteria, to individual stocks and bonds of companies that prioritize sustainability.

Overall, sustainable investing offers the opportunity to achieve both financial returns and a positive impact on the world. By considering environmental, social, and governance factors in your investment decisions, you can build a portfolio that reflects your values and makes a difference.

How can KLDX play a part in sustainable investing?

At KLDX, we believe that our platform plays a crucial part throughout the development of ESG projects through the facilitation of sustainable financing and lifecycle management of these projects.

KLDX can facilitate the generation of carbon credits through projects that promote carbon sequestration which would further incentivize large corporates to play their part in ensuring that Malaysia is able to meet its unconditional target to cut national emissions by 45% against GDP by 2030 (as compared to 2005 levels) and to meet its obligation to become net zero by 2050 as per the Paris Agreement.

This is done by ensuring that sustainable projects undergo thorough due diligence prior to being financed by investors, complete end-to-end facilitation of the carbon credit generation process, and fundraising is carried out entirely on the KLDX platform through the use of blockchain technology that is hard coded into our platform.

This would ensure that an appropriate level of transparency is maintained throughout the fundraising, issuance of carbon credits, and periodic disclosures as per the whitepaper released by the issuer. Doing so would allow for adequate investor protection whilst playing our part in aiding Malaysia as it aims to meet its emissions mitigation targets.

At KLDX, we understand that there exists a variance in the types of funds that could be raised – via equity, fixed income and funds. Of these methods, project developers tend to gravitate towards fixed income fundraising due to the funds raised being better suited for a project basis.

The KLDX platform is well equipped to facilitate fundraising for a plethora of fixed income financing methods – green financing, social financing and sustainability financing (combination of green and social financing as per UN SDGs).

Corporates are also able to fundraise to fund their company’s transition to a more ESG-focused future by offering a fixed income product or even equity.

Relevant KPIs would be set in place in the whitepaper prior to the fundraise and corporates are to meet these requirements in order to avoid being charged a penalty.

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