There are now a variety of plant-based alternative food businesses that are capturing the interest of investors, especially venture capitalists and high-net worth individuals. When it comes to environmental, social, and governance (“ESG”) investing, consumers are seeking sustainable alternative food products and capital is following suit by flowing into the plant-based alternatives sector.
ESG investing is a strategy where investors put their money behind companies that have a positive net impact on the environment and society as a whole. Typically these companies are led by a strong management team that believes in achieving company goals through better corporate governance and social responsibility.
ESG investing has changed the plant-based alternatives market, as investors are looking for more sustainable business practices that align with their own interests and create a more meaningful portfolio.
Is Plant-Based Meat Sustainable?
Plant-based meat is a sustainable food source derived from plants. A plant-based diet has been shown to sustain better long-term health, while being environmentally friendly. Accordingly, plant-based meat alternative companies are great to incorporate into your ESG portfolio. Consumers’ concerns over the environment have created an increase in demand for more sustainable food products. Consumer groups, such as vegans and vegetarians, continue to pave the way to a more diverse product offering in the plant-based meat space.
When investing in ESG-driven companies, especially in the plant-based meat space, many investors’ values and interests tend to be aligned with those companies. Both parties are seeking sustainable growth, through accessible, affordable and healthy plant-based alternatives to the traditional meat market.
Aligning one’s interests and values with one’s investment portfolio can increase engagement and provide more meaning when allocating capital. When a company understands its core customers values, it is able to build trust and loyalty, and the same can be said for a public issuer that understands its shareholders’ core values.
Sophie’s Kitchen – BREADED VEGAN SHRIMP
How the Financial Community Is Impacting ESG-Value Oriented Companies
Investments in start-up companies, especially in the plant-based alternatives space, are being driven by ESG values more and more. Capital is expected to be readily available to companies that are able to improve the environment and peoples’ health, not only for vegans or vegetarians, but for anyone seeking a more sustainable diet.
The increased flow of capital to the plant-based alternatives market may end up curbing the effects of climate change. If consumers continue to consume fewer traditional meat products, and shift their focus to more sustainable companies, this may very well slow or even reverse some negative man-made environmental impacts.
What does the ESG investor stand for?
First let’s break down what the letters ESG stand for: environmental, social, and governance.
The environmental component of ESG investing addresses how a company’s business practices affect the planet through its carbon footprint, greenhouse gas emissions, energy consumption, and waste management practices, to name a few.
The social element covers issues affecting stakeholders like employees, customers, consumers, suppliers, and the community. Also taken into account are consumer privacy laws, employee compensation and treatment, and diversity initiatives.
Governance relates to the policies and practices of the board of directors and management team. An example of the main issues that are typically evaluated by ESG investors are management compensation practices, transparency of communication amongst shareholders, and ethical practices on running a public company.
Typically, an ESG investor takes into account the above 3 areas to assess whether their values are aligned with those of a company.
What are good ESG investments?
Good ESG investments are those that are made in one of many companies or venture capital platforms, like Billy Goat Brands (CSE: GOAT) for example, that have a strong and unique competitive strategy while prioritizing environmental, social, and governance issues. While ESG investing alone can’t solve the problems of climate change or socio-economic inequalities, Billy Goat identifies, invests and incubates businesses that actively work to address these challenges and provide alternative solutions.
Companies that measure ESG-based goals as a key success factor demonstrate modern leadership. ESG-driven investments can also reduce portfolio risk, as these companies are constantly working to address concerns raised by its stakeholders, which is a behaviour that tends to produce more reliable financial results over time.
How does ESG investing make a difference?
ESG investing can make a difference by allocating capital to companies that exist to improve environmental and social issues. For example, businesses that make an effort to curb their greenhouse gas emissions and reduce waste demonstrate better business practices and address climate change head on, while striving to also make a profit.
How does the ESG investment style work?
ESG investing is measured on a variety of metrics, through accounting practices, diversity of management and board members, and community involvement, to name a few metrics. Aligning your investments with your values and supporting companies who share the same values as yours is a way to drive positive change in the capitalist economy.
ESG investing is not only a type of investment style used to diversify your portfolio, it’s also a practical approach to zooming in on companies and conducting a broader due diligence investigation than just examining financial ratios. By following an ESG-based set of investment criteria, you can potentially avoid higher-risk companies such as one that produces high levels of greenhouse gas emissions.