Sustainability is Becoming Investors’ Top Priority

A new report from the Boston Consulting Group (BCG) found that sustainability is steadily becoming more crucial to investors. However, investors and managers are not communicating this information. The report suggests a number of steps business leaders can take to bridge the gap.

BCG’s seventh sustainability report in collaboration with MIT Sloan Management Review found that 75 per cent of senior executives in investment firms see a company’s sustainability performance as materially important to their investment decisions—and nearly half would not invest in a company with a poor sustainability track record. However, only 60 per cent of managers in publicly traded companies believe that good sustainability practices influence investment decisions.

The report, Believe, is based on a survey of more than 3,000 executives and managers from more than 100 countries.

A key factor in investors’ increasing engagement with sustainability is the greater availability of data. In the past, limited access to information forced sustainability-focused investors to take a more exclusionary approach, identifying and shunning companies that harmed the environment. Today’s investors, armed with richer data and more sophisticated analytics, can have a more inclusive and nuanced perspective.

Furthermore, the ability to access and analyse more data has revealed that sustainability and performance are not mutually exclusive: 75 per cent of investors now think that increased operational efficiency often accompanies sustainability progress.

The disconnection between investors’ and managers’ perceptions means that too few companies are prepared to attract sustainability-savvy investors. The research showed that although 90 per cent of executives see sustainability as important, only 60 per cent of companies have a sustainability strategy in place, and just 25 per cent have developed a clear sustainability business case that can serve as a compelling story for investors.

The report aims to bridge this gap with suggestions for business leaders.