Date: 2024-10-31 Page is: DBtxt003.php txt00011244 | |||||||||
Sustainability | |||||||||
Burgess COMMENTARY | |||||||||
Investors Care More About Sustainability Than Many Executives Believe A recent study by MIT Sloan Management Review found that investors recognize that good sustainability performance is a source of many types of business value. The top three are: increased potential for long-term value creation, improved revenue potential, and operational efficiency. Click here to view the full figure, or click here to access the full report. | Image credit: MIT Sloan Management Review Understanding investor priorities is an important responsibility for a company’s top executives and its board of directors, yet, new findings show that managers’ perceptions of investors are out of date. A 2015 survey of more than 3,000 managers and investors in organizations from over 100 countries conducted by MIT Sloan Management Review and The Boston Consulting Group (BCG) found that investors increasingly believe that sustainability performance creates tangible value and are prepared to divest from companies with a poor sustainability footprint. The results are captured in a new report, Investing For a Sustainable Future, co-authored by Gregory Unruh, David Kiron, Nina Kruschwitz, Martin Reeves, Holger Rubel, and Alexander Meyer zum Felde. The authors suggest that executives are wrong to buy into the conventional wisdom that mainstream investors care little about an organization’s environmental, social and governance (ESG) performance, and back up the assertion with in-depth analysis. In turn, they also identify what corporate leaders can do to stay relevant to sustainability-oriented investors. Some of their key findings include:
The shift in investor attitudes seemed unlikely even 7 years ago. In 2009, Bloomberg researchers found that just 22 percent of the 766 CEOs they surveyed from around the globe believed investors would be key stakeholders in driving their action on sustainability over the next five years. And while the MIT Sloan Management Review authors assert that this perception “has passed its sell-by date,” they also acknowledge that sustainability metrics have only recently become so important to investors. Their 2015 survey showed that 74 percent of all investor respondents believe that sustainability performance matters more than it did 3 years ago. The authors suggest that investor interest in sustainability is being driven by at least three factors: The growth of analytics and sophisticated modeling that shows how and when sustainability investments create shareholder value; Research from academic institutions and investment firms that links effective management of material sustainability issues to strong financial performance; and A shift in attitude within the investor community about the connection between strong sustainability performance, value creation, and risk reduction. “Companies have been complaining that nobody cares about sustainability,” commented Robert Eccles, chairman of Arabesque Partners and professor of management practice at Harvard Business School. “But investors care, and companies need to up their game.” Hannah Furlong is an Editorial Assistant at Sustainable Brands, based in Canada. She recently completed her Bachelor's in Environment and Business Co-op from the University of Waterloo. Hannah has been actively working on startups for over three years, and is… [Read more about Hannah Furlong]
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