How does having good amount of funds in the
bank amount make a business stronger to take any kinds of risks? Well the
obvious answer to this is that the funds in the bank act like a cushion, ready
to save the company in case they experience a fall in their business. When a
business is backed up by a good amount of funds, they ensure that the company
can keep running even if their said project was a debacle. It gives them more
time to come out of the loss, think what went wrong and maybe come back
stronger and with new and fresh ideas for the market.
There are many types of funds and assets
that a company invests into. There are some funds, like the long
short funds, mutual funds that are necessary for the long running of
the company and then there are some other funds such as the CSR or the ESG
funds (environmental, corporate, governance) funds that might act as a catalyst
in the smooth functioning of the business and also ensures improved credibility
of the business.
When a company invests in the ESG
funds, it becomes a criteria for the investors to choose the best
business from. For example, if there is a hefty investor who believes in the
idea of environmental preservation and he finds a business whose ideas are
aligned with his, then they are sure to go for that business. There are many
investment banking companies or brokerage companies that help to employ the ESG
criteria. The same logic applies for investors looking through the social
criteria and the governance criteria as well.
When it comes to governance, investors need
to know that the said company is following all the ethical accounts practices
and the share holders have equal voting rights. With social criteria, it
includes whether the investors having relations with appropriate suppliers,
whether the give benefits to the employees and so on.
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