Two Surveys Confirm Business Leaders Value ESG Practices

Stay informed of ESG trends by following StartingUpGood and reading our articles on LinkedIn. This article was originally published on August 1, 2023 in the StartingUpGood Magazine on Medium.com.

Using the term ESG to describe the consideration of such factors as climate impact, sustainability, fair pay for employees, and diversity on decision-making has been the topic of much scrutiny and (undeserved) derision of late. However, the principles of responsible business practices remain a priority for asset managers and corporate leaders alike, two recent surveys from PitchBook and 安永 reveal.

2023 Sustainable Investment Survey

PitchBook’s fourth annual 2023 Sustainable Investment Survey, released in early July, “provides a window into (the) overlapping and sometimes conflicting views on Impact and ESG.”

Survey respondents were more polarized about their ESG views than in previous years, but most (75% of asset managers) still believe that the consideration of sustainability is important. Differences by geography exist, with allocators in Europe and Asia-Pacific being more likely to utilize ESG investing frameworks than their North American counterparts. Climate and environmental impacts topped the charts for focus areas.

On July 26, 2023, Hilary Wiek and Anikka Villegas representing PitchBook’s Fund Strategies & Sustainable Investing group, hosted a webinar to highlight the report’s key findings.

Key Findings Highlighted During 7/26 Webinar

****Please note: these findings are copied directly from the slides presented during the webinar on 7/26/2023 ****

• For many, the era of exploration with respect to sustainable investing has ended — market participants have made up their minds about whether or not it has a place in their businesses or portfolios.
• Respondents have become more polarized on how they prioritize sustainable investing compared to top performance — but the vast majority believe both are important to some degree.
• Asset owners are driving the prioritization of performance, but more than 75% still believe that at least some consideration of sustainability is important.
• In diligencing fund managers, European allocators are most likely to evaluate ESG risk factors while only 48% of North American LPs do; a full 61% of allocators have declined an investment based on ESG concerns.
• Asia-Pacific and European GPs are most likely to utilize an ESG framework in the evaluation of an investment — 72% of all GPs have declined to make an investment based on ESG concerns.
• Environmental impacts are by far the top ranked area of focus, with Governance being the one ranked lowest of the options.
• Energy and climate were the two most popular categories of Impact investing by far, holding steady in first and second place since last year, with an even greater share of respondents selecting them in 2023.
• However, Impact measurement is not yet standardized, although slightly more than half of surveyed LPs would prefer that their managers measure Impact.
• With respect to ESG, there are many different perspectives on how an ESG-aligned portfolio should look, with most respondents falling in the middle of the portfolio “cleanliness” spectrum rather than on the ends.
• Convergence around one set of ESG or Impact frameworks or standards has yet to occur, with little progress made from last year.
• At present, the economic and geopolitical landscape do have some influence on the sustainable investing focus of respondents.
• However, their effect is even greater on perceptions of how others’ focus on sustainable investing has shifted.

Learn More

• 2023 Sustainable Investment Survey
• On-demand webinar recording
• Download presentation slides

EY Global DNA of the CFO Survey

In June, EY released its Global DNA of the CFO Survey that highlights the complex and contradictory demands CFOs face as they strive to drive long-term value and find short-term cost efficiencies. ESG was one component of this survey.

The survey of 1,000 financial leaders from 21 countries found that ESG is the top long-term investment priority globally. However, respondents indicated that they would be more likely to cut ESG investments in order to meet near-term goals.

Key ESG Findings

• ESG was tied with “Technology and Digital Innovation” as the top long-term investment priority at 43%.
• When asked how likely respondents were to cut investments in a category in order to increase near-term profits, ESG was again the top response at 37%.
• 51% of CFOs who are “pursuing bold change” said ESG was a top priority compared to other respondents at 42%. However, they are also more likely to cut ESG and climate change priorities at a higher rate of 44% compared to 32%.

Learn More

• Global DNA of the CFO Survey
• 2023 Global EY DNA of the CFO Report (pdf)
• EY Survey: Global CFOs View ESG As Top Investment Priority (Forbes, July 25, 2023)

Conclusion

ESG is a far-reaching and and comprehensive strategy that encompasses more than a company’s eco-friendly measures. Both surveys referenced above demonstrate that key business decision-makers understand the positive correlation between ESG practices and company performance.

Corporate leaders will need to continue to measure and manage the impact of ESG-related activities, especially over the long-term, even if the future of ESG terminology is in question.

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