Responsible investing

One outcome of the pandemic has been a global reckoning in terms of social responsibility — a reappraisal of what is important and what people and companies truly value. COVID-19 may not be over, but market opportunities abound as some economies begin to reopen. 

It didn’t take long for the technology sector to step up with what I consider to be a “responsible innovation” response. Powerful technology innovations are being introduced across virtually every sector to address the opportunities and challenges that the pandemic has revealed. Technology companies have taken the challenges to heart, creating new technology-based product and service innovations that can be commercially, socially and economically transformative. 

Not only are these companies raising the bar on innovation, they are also achieving a positive impact on society by helping companies to improve their operations, deliver more value to their customers (as well as their shareholders) and create a more sustainable future in which people can live better and more equitably. 

Environmental, social and governance (ESG) is increasingly on the investor radar screen as a result, fuelled by the impetus for achieving sustainability gains across the business world. New technology market opportunities are in abundance with companies introducing breakthrough innovations in products and services that other businesses require to achieve their own sustainability goals — especially those companies that have ESG-aligned business models, such as electric vehicles, fintech, food tech and healthtech. 

As we reported in the recent Q2’21 KPMG Venture Pulse Report, the critical need for healthcare and medical advances leaped into awareness during the pandemic, driving intense interest in a wide range of biotech and health-related products, medical devices and services. Digital health care is now emerging as a frontrunner in helping to close the gaps that became all too apparent in providing people around the world with equitable access to health care.

Likewise, “shop from anywhere” mobile technology is opening consumer access and transforming the retail landscape. And there are clear signs that the financial services and banking industry is rapidly increasing its focus on innovation as it shifts towards digital products and services that can open doors to more customers as well.

These innovations are designed to support and enhance companies’ sustainability goals. They are also stimulating mass infusions of capital into thousands of technology startups and emerging growth companies that are developing innovative solutions for the underlying social and environmental issues that the world has become more aware of. That’s why I believe that ESG is revolutionary for the technology sector because it is positioning technology companies as a collective force for transformative and sustainable change.

In my view, the next wave of transformation will likely be related to “responsible investing”, which has been widely understood as a way to bring ESG factors into the investment analysis, review and decision-making process. Typically, responsible investing requires an examination of how a target company is responding to climate change, addressing global labor practices, managing their supply chains, protecting the health and safety of employees and so forth. 

In proposing that ESG is revolutionising the technology sector itself, I believe the time has come to adopt a new perspective on how to define responsible investing as well. I don’t question the importance for responsible investors to continue to seek evidence that the companies where they choose to invest are operating in an ethical and environmentally and socially responsible way. However, there is an emerging opportunity to go further by redefining what it means to be a responsible investor in the technology sector specifically. 

ESG progress is unfolding in the technology community from a unique vantage point: innovators have embraced their responsibility for creating a new wave of products and services that bolster the sustainability of the planet. Companies are depending on them for help in achieving their own ESG goals, and it is my belief that those innovations (and the companies behind them) are becoming the new backbone of responsible investing.

Let’s expand the understanding of what responsible investing represents in the technology sector. It cannot be based on tremendous growth opportunities alone. The technology sector is being revolutionised by ESG with the acceleration of responsible innovations that can have a direct impact on the environmental and social solutions the world so urgently needs.

Investing in companies that are developing solutions that can lead to transformative and sustainable change is not only a potentially high-value choice, but also an important one for advocates of responsible investing.

We at KPMG Private Enterprise have always believed in the tremendous potential of entrepreneurs and emerging growth companies that are having a positive impact on the world. I encourage you to follow our regular KPMG Private Enterprise series of blog posts as we share insights from across KPMG member firms on how private companies are creating value for the world while also positioning themselves for future growth.

Written by Jonathan Lavender: Leadership, Global Head of KPMG Private Enterprise and Head of Markets.

Throughout this website, “we”, “KPMG”, “us” and “our” refers to the global organization or to one or more of the member firms of KPMG International Limited (“KPMG International”), each of which is a separate legal entity.