18. Ethical Finance Awards 2023 Wealth & Finance Best Independent Investment Manager 2023 – Switzerland & Excellence Award in Sustainable Investing 2023 MOMentum Alternative Investments is a regulated Swiss investment boutique, which manages – inter alia – the Multilabel Lyra fund. The firm is a member of the Sustainable Finance Forum (ItaSIF) and of Euronext’s Sustainable Finance Partnership. MOMentum’s Chief Investment Officer – Gianluca Pediconi – is also a Sustainable Finance Ambassador, certified by the UK-based non-profit organization SPSC - Sustainability Promoters & Sustainability Collaborators, and a member of the Italian Association for Financial Analysis (AIAF). First and foremost, “sustainable business is good business, delivering better financial results while protecting the planet and its people” (NYU Stern CSB), and “ESG factors are critical to a company’s long-term value” (Alex Edmans, London Business School) and “[are] an actual driver of economic value” (George Serafeim, Harvard Business School). “A fully integrated corporate sustainability strategy can help organisations to better manage risks, to win business opportunities and to ultimately strengthen reputation” (Paolo Taticchi, UCL School of Management). We, at MOMentum, share the opinions of these eminent scholars. As responsible, longterm-oriented investors, we want to prove that there is no trade-off between financial return on investment and sustainability. On the contrary, it is precisely through sustainability that we can create a virtuous circle. By investing in the most ethical companies, we contribute to lowering their cost of equity, which is a fundamental component of their cost of capital. By doing so, these sustainable companies will finance sustainable projects and investments cheaply. Thus generate – ceteris paribus – a higher net present value, to be shared. We want to contribute to redirecting private capital towards projects and investments which are truly sustainable. Sustainable investing should not be a niche for philanthropies only, but mainstream. I dare add that the adjective sustainable is even pleonastic. It is just investing, able to offer superior returns to attract private capital, aiming at lowering the cost of capital of the most virtuous enterprises and stimulating their investments. The modern, sophisticated entrepreneur and investor have realised that they cannot reduce the concept of value creation to shareholders’ value and have profit maximisation as the sole objective. We prefer to think in terms of stakeholders’ value, where profit is no longer the goal of a company. It is a fundamental by-means to satisfy the needs of its stakeholders. Profit is essential to attract investors, remunerate capital, and fund the business. Indeed, this vision is the only option to grow sustainably and profitably in the long run. I have mentioned a few key notions. The first is that of stakeholders: employees, customers, suppliers, investors, and the community (people/government/public bodies, etc.). The purpose of an enterprise is not to save the world but to accomplish its mission to the best of its ability. It must prioritise the different stakeholders and enter into the order of the ideas that it is unlikely it could satisfy all of them and, sometimes, one has to make clashing decisions. Once an enterprise has mapped and prioritized its stakeholders, the purpose must be embedded in its strategy and permeate the entire corporate structure and culture. A simple example helps to understand the importance of considering all stakeholders and not just its shareholders. Take, for instance, the employees. Human capital is today the most important intangible asset for a modern company in a developed country. Most of the market value of a company today is attributable to intangible assets, such as R&D, brand, goodwill, and sustainability (human capital included). Sustainability is just another intangible asset – difficult to reckon and gauge. However, it is a driver of long-term value. Today, young people want to work for companies that share their values of sustainability. A company that does not understand this will not attract the best talent, make them grow, and retain them in-house. Therefore, this company will not be able to grow and thrive. Each employee is also a consumer (perhaps not of the goods or services produced by the company they work for). All together, they represent the Demand. Millennials and Generation Z have sustainable consumption habits. Again, a company that does not understand and meet these demands for sustainable products and services will eventually see its turnover suffer. All employees are also investors, perhaps only indirectly through their pension funds. Together they are in a position to influence the decisions of the shareholders’ meetings and, thus, a company’s strategy. Finally, all employees are voters. With their vote, they elect governments and local authorities. Their opinion, with the explosion of social media, has an increasing impact on political decisions, which can have significant repercussions on the destiny of a company (through incentives, rates, bans, etc.). Once again, a non-sustainable company is unable to intercept these needs and will therefore find itself displaced. In developed countries, Millennials and Generation Z represent 2/3 of the population. However, they own only 6% of the net wealth. Their worth is expected to quintuple by 2030, and $30 trillion will be transferred from Baby Boomers to Millennials. Circa 90% of youths are interested in sustainable investing and are twice as likely to invest in companies with clear social or environmental goals, consume responsibly and want to live and work in a more sustainable way than their parents. Contact: Gianluca Pediconi Company: MOMentum Alternative Investment SA Web Address: www.mominvest.com
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