What to understand about sustainable investments

Several qualities would undoubtedly contribute to the flawlessness of what some might consider a perfect investment. A few characteristics of such a deal might include being risk-averse, cost-efficient, transparent, and easy to manage. Naturally, these investments might seem like a needle in a haystack, but data analytics are changing that. Let’s discuss how data can help qualify sustainable investments, improving portfolios and portfolio companies with highly tailored insurance products. 

Before we dive into sustainability, let’s get the backstory. Environmental, social, and governance (ESG) criteria help us evaluate a company’s moral status and investment dynamics. Institutional investors and other stakeholders, not to mention our modern society, consider these factors valuable insights regarding how well a company will fare on the open market long-term.  

It’s no surprise that sustainable investments are also known as socially responsible or ESG investments. Customer demands and expectations change along with people’s priorities. As a result, businesses worldwide now spotlight corporate social responsibility as a major selling point. Sustainable investing consists of a few objectives, which are:

• Supporting a positive impact on society at large
• Long-term financial return
• Corporate responsibility

Instead of focusing solely on short-term ROIs, investors now play a long game, improving their investment’s societal impact by acknowledging the broader picture. Naturally, risk management plays a significant role in the longevity of a company. 

How a digitized approach empowers investors

As you likely know, investing is far more than a gamble or a guessing game. Betting on the dark horse isn’t always a solid strategy — not anymore, at least. A digitized approach helps investors identify key nuanced factors pointing to whether an investment is a good bet or a bad bet. 

Data analytics
Data analytics helps professionals make sense of information that might otherwise seem confusing. For example, data analytics improves risk classification and assessment in the insurance space. More current data means insurers can address risks more appropriately with policies that cover genuine threats, not only possible vulnerabilities. Moreover, insurers can personalize rates down to particular risk predicting factors. 

Artificial intelligence
One risk management process most influenced by AI is no doubt underwriting. AI and machine learning in the underwriting process streamlines the entire insurance buying experience. As mentioned earlier, clients have access to coverage quicker and with less hassle, freeing up insurers to build customized insurance plans for companies with unique risks.  

AI improves the logic behind submission questions, enabling a fully automated insurance buying experience across multiple product lines. These tailored algorithms simplify the insurance application process by sorting through various profiles, such as industry type, funding amounts, etc. It takes much of the guesswork out of risk management planning. 

Another bonus, data integration isn’t only about managing risk with insurance products. Investors can also utilize AI and data integration in underwriting based on investment metrics. 

Blockchain
As a new and fast-growing technology, blockchain can potentially offer solutions to many challenges, such as data protection, privacy controls, and supply chain. Fortunately, as blockchain technology matures, its solutions spill over to many industries, aggregating data to keep it safe and secure. Like many others, investors can use blockchain to protect information and keep it shareable across multiple channels, i.e., carriers and agencies. 

Why sustainability matters
Although ESG issues rely on inconsistent regulations, institutional investors integrate ESG into their strategies. As a result, companies have begun to commit more effort to public ESG disclosures. 

ESG investing isn’t only a hot topic; it helps mold the world into a better place by contributing to positive social change. The numbers don’t lie; investors and companies benefit financially by making more sustainable investments. By using data analytics and a digitized approach, industries across the board can enjoy a more profitable outcome.