The German Mittelstand
More optimism through sustainability
It is becoming increasingly worthwhile for listed companies to convert to a company culture oriented towards greater sustainability. This is especially true for SMEs. Why? Because institutional investors are shifting towards deciding where to invest on the basis of factors of sustainability. This emerges from a survey on sustainability published by Union Investments – a company in the field of capital investments according to which 56% of investors interviewed stated that they take sustainability into account when selecting where to invest. The satisfaction rating calculated by Union Investment for sustainable investments has risen sharply and stands at 13.4 points. In 2013 the barometer read 5.4 points, and in 2012, a mere 4.2 points. The survey was conducted over 215 major investors with a total asset worth of some 1.5 billion Euros.
Today, issues of sustainability, as in how they affect investment decisions, are mostly judged along the guidelines laid down by the major investment companies concerning the environment, social responsibility and corporate governance. These highlight the sustainability requirements of the investment company involved regarding the object being considered for investment. Some experts deem that the issue of sustainability be part of the classic capital investment triangle composed of security, revenue and liquidity, because companies who give their support to sustainable management instead of chasing the quick profit can offer investment companies a much higher degree of security as protection of their investment.
In other words, companies who spurn criteria of sustainability run the risk of sustaining substantial losses. During the conference on sustainability organized this year also by Union Investment, Dr. Solveig Pape-Hamich, Head of Investment Strategies and Sustainability in KfW talked about two very high-profile examples. In 2012 the bloody suppression of a miners’ strike called to obtain more humanly acceptable working conditions brought long-term damage and great financial instability to the Lonmin mining company in South Africa. In 2010, the event that took place on the Deepwater Horizon drilling rig brought serious consequences on the collective heads of the BP oil group.
Stock market-listed companies that can be convincing with a credible and traceable strategy of sustainability regarding the environment, social responsibility and the way they themselves are managed are at an advantage in the quest for an investor. Developing in an increasing awareness of sustainability criteria in matters of investment is of particularly strategic importance for second-rank-listed SMEs.