Antonio Braz
Managing Director of Gesvalt Portugal

Sustainable investment is starting to become a priority for companies, which are beginning to commit their efforts and budgets to initiatives with environmental, social and corporate governance criteria. In this sense, sustainable products are highly attractive to investors and are in high demand. We at Gesvalt have observed that the demand for ESG consultancy has more than doubled compared to pre-pandemic levels. Furthermore, and in this regard, it should be noted that funds with ESG criteria already account for a third of sustainable investment in Europe, according to the latest report by BofA Global Research. Nevertheless, the regulatory framework that encompasses this type of investment requires a large amount of documentation and preliminary conditions that already represent an initial barrier in the commitment to sustainability. Despite these regulatory difficulties, the opportunities present in sustainable investment are many and with a very high return on investment.

Firstly, financing is the first major opportunity to take into account when delving into a green investment. The climate emergency we are experiencing is greatly speeding up the ecological transition and bringing about changes in the way this new sustainable perspective is understood. Due to this, organisations and governments are putting pressure on the business fabric to start stepping up to the plate in terms of sustainability and SDG compliance. However, they are also assisting companies in this task with some issues such as financing. Next Generation recovery funds are some of the aids promoted by the European Union for which they have established that ecological transition will be one of the goals to which aid will be allocated. Therefore, having this financial support helps investors to reduce the risks of the operation, especially if we consider the deterioration of credit conditions with the increase in interest rates derived from the rise in inflation.

Secondly, ESG investing favours the company's visibility, positioning and reputation both with regard to its target public and consumers and also the social agents that surround it, who are increasingly aware of sustainability and care for the environment. In this sense, since the race to reduce CO2 emissions has started to gain importance, it has begun to be perceived that users choose companies for this type of commitment to society and the planet. For this reason, companies have to start being aware of the opportunity and positive consequences of investing in renewable energy, provided that this investment is made in the context of a feasible, responsible and well-executed plan.

In this regard, and in order to be able to establish that sustainability commitment plan, the company must take into account the challenges it will have to face when performing this task. The first step will consist of carrying out an internal evaluation through interviews or performance questionnaires, followed by a competitive benchmarking study. On the basis of this initial analysis, a strategic action plan can be established to make sustainable investment become a reality. The second step will be an analysis of the materiality of the potential investment drivers through a report measuring potential risks and opportunities in order to quantify their impact. Subsequently, it will be highly beneficial to establish general and sectoral KPIs so that a qualitative evaluation can be made at the reporting stage based on robust information extracted from reliable information flows.

Aimed at the fulfilment of this goal, it is essential to count on a company both specialising in this matter and also engaged with this commitment to ecological transition. Therefore, advice in the field of energy audits, green financing or environmental certifications and studies is essential when investing in sustainability. Some of the reports to be submitted by companies to support their financial investment are, for example, Due Diligence studies. In addition, the international recognition of RICS reports provides unification of criteria to the requirements for investment in real estate assets. At Gesvalt, we help companies to formalise their commitment to green, submit this documentation accrediting the company's commitment to investment and meet the necessary requirements set out by governments and administrations as part of the global climate change agenda.

Therefore, and despite the regulatory barriers that hinder companies from investing in sustainability, the advantages obtained can be seen both internally within the company and externally. As for the positive consequences within the company, the first of these has a direct impact on the company's balance sheet. This is due to the fact that companies have to support sustainable investment with a vast amount of preliminary reports and analysis, which reduces errors when drawing up financial projections and makes the investment a safe bet for investors.

In this way, costs are reduced and the savings targets in the company's accounts can be achieved. Likewise, it means an improvement in the valuation reports that the company would have to deal with when in many occasions it is faced with a sale and purchase process that requires a preliminary valuation.

As regards the external impact, sustainable investment helps to implement changes in internal management practices and strategies and to introduce improvements in terms of training, monitoring and the perception of the social agents' vision of the company. As a consequence, the positive repercussions of sustainable investment have an impact on both the social and the environmental spheres, which in turn has a direct impact on the company's financial results and therefore on the well-being of all individuals. All in all, sustainable investment is the new way of committing to a company's growth. Moreover, taking into account the current scenario and the many advantages for those who can access companies, the commitment to being more responsible is an investment with a lower associated risk and, therefore, a safer investment.

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