More and more investors are investing in responsible businesses – and with very good reason. Ethical companies are more efficient at risk management and yield more stable long-term profits. The benefits apply particularly to companies that are industry frontrunners in sustainability.
According to a study conducted at Aalto University in Helsinki, Finland, responsible environmental and social practices and good governance have positive effects on a company’s long-term financial performance. “However, this is only true of companies whose corporate sustainability strategy is put into action rather than just remaining at the level of empty words,” says Hanna Silvola, Assistant Professor at the Aalto University School of Business.
Companies that operate responsibly can benefit in many different ways. For starters, it fosters a positive image that generates further market interest in the company’s products and services, thus providing a competitive advantage. The corporate executives interviewed by Silvola’s research group also stated that responsible companies find it easier to secure funding.
“When a company openly discloses information on its operations and risks, the cost of capital is lower.”
Responsible investment means smart risk management
Silvola points out that responsibility initiatives are most profitable when incorporated into the company’s operative management, using scorecards and rewards, for example. Setting clear objectives and measurement of the results is essential. “Responsibility targets should be as simple as possible, going all the way down to the level of individual employees. In energy saving initiatives, for example, clear numerical targets can be set for electricity and fuel consumption.”
International studies confirm that an increasing number of investors are looking to invest in responsible companies with open reporting principles. These companies are considered a safer investment with greater promise of yielding steady, long-term profits. Risk management is in fact the key motive for many responsible investors.
UPM as a responsible investment
Through the renewing of the bio and forest industries, UPM is building a sustainable future across six business areas worldwide. Our products are made of renewable raw materials and are recyclable. The group employs around 19,600 people and its annual sales are approximately EUR 10 billion. UPM is listed on UPM shares are listed on NASDAQ OMX Helsinki.
- UPM is listed on CDP Forest A list and is the forest and paper industry leader in the Dow Jones Sustainability Europe Index (DJSI) for 2016-2017.
- UPM was invited to join UN-led Global Compact LEAD in January 2016.
Read more about UPM as an investment.