Investors Care More About Sustainability Than Many Executives Believe

Sustainability is increasingly important for investors, as evidence mounts that companies' environmental, social, and governance performance has an impact on long-term financial success.

BCG’s seventh sustainability report in collaboration with MIT Sloan Management Review found that 75% 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% of managers in publicly traded companies believe that good sustainability practices influence investment decisions.

The report, Investing for a Sustainable Future: Investors Care More About Sustainability Than Many Executives 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 analyze more data has revealed that sustainability and performance are not mutually exclusive: 75% of investors now think that increased operational efficiency often accompanies sustainability progress.

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

The report suggests several steps business leaders can take:

• Build awareness of sustainability challenges and programs—both within companies and among stakeholders, including investors.
• Identify and analyze the material sustainability issues that can affect performance and align the organization to ensure an integrated response.
• Invest in and focus on tangible and measurable sustainability outcomes instead of positions on ratings lists.
• Formulate a sustainability strategy and incorporate it into the overall corporate strategy, including a clear business case.
• Engage investors and a broad range of stakeholders to discuss the company’s sustainability strategy and progress.