A new Morgan Stanley report revealed that 85% of corporate decision-makers believe sustainability is either primarily (53%) or partly (32%) a value creation opportunity.
“Sustainable Signals: Understanding Corporates’ Sustainability Priorities and Challenges,” a new Morgan Stanley Institute for Sustainable Investing report, shows that potential for creating value is the top reason corporations pursue sustainability strategies.
According to the survey, which included representatives of more than 300 companies from North America, Europe, and Asia, value creation is the most significant motivator for companies to pursue their sustainability strategy, with half of respondents rating it as a very significant reason.
Most respondents (55%) also say sustainability criteria influence critical business decisions, e.g. capital expenditures, research and development, new products, and mergers and acquisitions.
Other top reasons to prioritise sustainability include regulation compliance, moral obligation to do what’s right, customer expectations, challenges to the business model, and expectations from corporate executives or the board of directors. Between 45% – 48% of corporate decision-makers find these arguments compelling enough to accelerate their sustainability endeavours.
At the same time, respondents gave less weight to motivations unrelated to business opportunities but caused by outside pressures. Just 26% cited pressure from NGOs, activists, media, or other representatives of civil society as an important factor in sustainability pursuits.
For the majority (70%) of respondents, the required hefty investment is either a very significant or somewhat significant hurdle in adopting their sustainability strategies. Other obstacles include a lack of corporate leadership (19%) or employee skills (19%), conflicts with the company’s financial goals (28%) or business model (24%), and macroeconomic uncertainty (25%).
Certain lack of awareness also hinders sustainability efforts. Thus, many respondents think their company’s directors could benefit from better knowledge of sustainability regulations (57%) and sustainability-labeled financing instruments (43%).
It appears that financing is the primary prerequisite of a successful ESG strategy. About 84% of respondents say support from investors is essential for the companies to deliver on their sustainability promises. One-third of respondents (34%) acknowledge there is room for improvement in their efforts to align corporate financing with their sustainability strategy via financial instruments such as green bonds.
That gives plenty of opportunities for sustainable investing to continue its growth.
“Sustainability as an investment theme continues to evolve towards more nuance and rigor as investors must confront competing priorities – such as climate and the social costs of high energy prices – and focus on “real” impact. As a consequence, companies continue to engage on the topic of accessing capital to finance their sustainability goals and initiatives. As we approach deadlines for various climate commitments from corporates and investors, there will be a continued push for financing clean tech and facilitating the energy transition, resulting in a natural maturation of the market.”
Melissa James, Head of the Global Capital Markets ESG Center of Excellence
