2 min read

No Need to Speculate, Sustainability is Here to Stay

No Need to Speculate, Sustainability is Here to Stay

Since the beginning of the year, the carbon credit market has been on a turbulent ride that reflects the public stock market.

The underlying assumption by speculators seems to be that as earnings weaken and stock prices decline, corporations will pull back on spending, including reducing their carbon footprint.

After all, this is precisely what happened in the early 2010s.

This time the speculators are wrong.

Booming Carbon-Credits Market Took Hit as Stocks Sold Off - WSJ

Unlike a decade ago, businesses with commitments to sustainability are more desirable to talent and capital.

Last month during a meeting with a Fortune 500 executive, the Energize team asked if the push toward sustainability was a trend with staying power; they responded:

Absolutely,  for us to recruit top-tier talent, we have to be a leader here, and a sizable portion of new recruits ask us for our ESG policy before deciding to join our firm.

The data indicates this is the rule, not the exception.

A recent study from IBM indicated more than two-thirds of people say they are more willing to apply for (67%) and accept (68%) jobs from organizations they consider to be environmentally sustainable.

More than that, 1/3 have recently switched jobs AND were willing to take a pay cut for companies they considered more sustainable.

Sustainable companies also have a lower cost of capital given the financial market appetite for these businesses, and they can stretch that capital further due to the labor dynamics above.

Source: MSCI

The charts above are from 2020, and given the push for ESG, it is possible that the spread from low to high ESG is wider. However, from this data, it's clear businesses with strong ESG profiles pay less to invest in their growth.

"This time is different" are the famous last words of any market movement, but with trillions of dollars and millions of people placing an emphasis on sustainability, maybe it really is.