By Morgan Terigi, CEO and Co-Founder of Incomlend
Historically, the main objective in business strategy was growth, to adopt an international approach and establish operations in foreign markets. However, that focus started to shift to more local surroundings over the past few years. The more local your investment and its subsequent positive impact, it is likely to increase profitability and allow your company to grow.
We have seen various forms of sustainable finance multiplying in recent years, with a growing number of institutional investors and funds incorporating Environmental, Social and Governance (ESG) in their investing approaches. While financial performance remains paramount, companies that have demonstrated ESG principles have a leading edge over competitors.
SMEs have faced financial challenges in the past two years brought about by the pandemic. As businesses struggled to stay afloat, ESG investment understandably fell by the wayside. With the current recovery journey, alternative financing offers them a way forward into an ESG-driven future.
Alternative financing, particularly invoice lending, offers investors the opportunity to purchase unpaid invoices at a cut down price. It gives businesses quick access to cash and, for investors, the promise of profits in the future. Invoice lending allows SMEs to plan for the future confidently. They can access capital financing quickly and efficiently without waiting for months for their invoices to be paid in full. It allows them to plan their supply chain in a more vibrant, sustainable future. SMEs, who have used an invoice financing programme, have already seen the benefits.
The positive impact of ESG investment
According to the latest report from the Global Sustainable Investment Alliance, sustainable investment in key markets, including the US, Australasia, and Europe, is actively growing, have reached $35.3 trillion this year, according to the latest report from the Global Sustainable Investment Alliance. The rise in ESG investment has had several positive impacts on businesses and corporations, their public image, stock price, and overall market profitability.
In a study earlier this year, UK Butterfield Mortgages Limited (BLM) found that approximately700 UK investors surveyed, a quarter had plans to make ESG investments by 2025, with over fifth planning to do so within the year. Meanwhile, 3 out of 10 investors were willing to accept lower returns if it meant that their money had a positive social or environmental impact. Similar findings were reported by Deloitte. Their research found that most investors indicated that sustainability efforts had positively impacted their revenue and position within the international investment landscape. Over half of those surveyed said that their sustainability efforts positively affected revenue growth and overall company profitability, while 48% reported increased customer satisfaction.
Intriguingly, however, it wasn’t only among shareholders and customers that such impact was felt, as 38% reported that their efforts to be more environmentally and socially sustainable led to an increased ability to attract and retain staff.
These findings were supported by a report from Trillium Asset Management whereby ESG investment was found to provide customers with a complete sense of the company’s value and values. ESG investment had been found to lead to greater operational performance in 88% of cases and increased stock prices in 80% of organisations. This positive change was also noted in the running costs of organisations, with 90% of those surveyed reporting lowered capital costs following ESG investment.
Looking ahead to 2022
Overall, this highlights several quantifiable reasons why investors are turning more and more to ESG investment. Not only does it lead to profitable returns, but it also increases public receptiveness to their organisation, increases customer satisfaction and makes employees feel valued within a company. Combined with invoice financing to increase cash flow at crucial moments within a company’s development, ESG investment provides a platform for SMEs globally to grow and develop both within and beyond their community.
As governments worldwide battle the impact and the potential fallout from climate change, ESG investment gives SMEs the peace of mind to know that they are doing the right thing to make the world a better and more sustainable place. With ESG assets predicted to reach $53 trillion by 2025 (a third of global AUM), according to research by Bloomberg, the time to invest is now.
Incomlend is an invoice financing marketplace giving SMEs access to tech-enabled working capital solutions worldwide. With a vision to narrow the finance trade gap underserved by traditional financial institutions, our tech-enabled and secure platform serves as a global invoice financing marketplace to match proven exporters and importers with world-class institutional investors. Founded in 2016, the Singapore-based fintech company is a trusted and reliable partner for its clients, financing over $500 million in trades in over 50 countries. For more information, please visit www.incomlend.com