Supply chain News and trends

Climate change ranks as a top priority for C-level executives (CxOs) in Deloitte’s latest survey, with 75% reporting that their organizations increased sustainability investments over the past year in spite of economic and geopolitical uncertainties.

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Investors should know how sustainable an investment actually is and be able to understand on what basis the corresponding assessment is based.

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Investment in supply chain technology and risk management is rapidly increasing as efficiency and sustainability becomes more of a priority across business operations, and two artificial intelligence platform providers announced receiving funding for their systems this week.

Those concerns helped supply chain tech companies raise $24.3 billion in venture funding over the first three quarters of 2021, according to PitchBook, which was 58% more than all of 2020. AI-software providers o9 Solutions and Supply Wisdom are taking part in the growth with investments in their platforms.

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Sustainability-driven investment is no longer considered a trade-off between generating economic value and positively impacting society. However, from an investor’s perspective, the current multiplicity of practices remains a substantial challenge, especially for those managing well-diversified, international portfolios.

Without a doubt, investor appetite for sustainable investment products is strong and growing. For example, the German Banking Association reported in 2021 that for 67% of surveyed investors, making socially and environmentally friendly investments is important.

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In its latest report, Pitchbook explores how sustainable investment is defined and carried out in the private market, and discovered there are different schools of thought on ESG investing. 

John Gabbert, Pitchbook Founder and CEO, says it found there are three approaches to ESG investing - ‘purist’, ‘pragmatist’, and ‘pluralist’.

“This can lead to very different-looking portfolios in private equity, compared to venture capitalism,” he says. “Where advocates for one approach might see a legitimate sustainable investment program, sceptics might see greenwashing.”

The main areas of differences in the three approaches concern the willingness, or otherwise, to invest in companies in high-risk ESG industries such as oil, coal, and gas, as well as medium-risk ones, such as food product manufacturing and textile production.

Gabbert says understanding these differing ESG philosophies and their implications “will reduce confusion over why legitimate ESG programs can result in such different-looking portfolios”. 

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The European Economic and Social Committee (EESC) fully supports the Commission's recent measures aimed at setting standards for the definition of "sustainable economic activities", but points out that some elements may prove a complex and costly challenge, particularly for SMEs, and questions whether the current version of the Delegated Regulation is fit for purpose.

The EU needs efficient and urgent measures to reduce emissions and get to grips with climate change. To that end, the Sustainable Finance Package presented by the European Commission could establish a clear, coherent and comprehensive framework in which a greener economy can develop without lock-in effects.

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