Climate investments found to increase revenue and reduce costs

Climate-friendly investments appear to pay off with increased revenue, more access to government incentives and reduced costs, a PwC survey of global CEOs has found.

Asked about the financial impact of their climate investments over the past five years, a third (33%) of CEOs said these had caused an increase in revenue from product sales, compared to just 5% who said they had resulted in a sales decrease.

At the same time, most respondents (60%) said climate-related investments had either decreased or not significantly altered costs – though PwC warns that these gains and costs are not distributed equally and depend largely on government incentives and regulations.

“For example, around half of CEOs in Germany and France report that making climate-friendly investments over the last five years has resulted in increased costs, against only one-fifth of their US counterparts. On the flip side, CEOs in the Chinese Mainland are much more likely to report additional revenues arising from these investments (60%), as well as additional government incentives received (46%), than their counterparts in other regions of the world.,” the consultancy adds.

Financial returns on climate investments on par with AI investments

Interestingly, climate investments appear to bring similar returns to investment in generative artificial intelligence (AI). One-third of CEOs report increased revenue (32%) and profitability (34%) from AI investments – which is slightly down from what they expected in last year’s survey. 

PwC believes that the profitability of climate investments is partly due to the fact that more and more CEOs (56%) have their executive bonuses linked to sustainability objectives. “The higher the percentage of CEO compensation at stake, the more revenue that’s likely to be coming from climate-friendly investments,” the report explains.

ESG-linked pay incentives are increasingly recognised as one of the most effective levers to drive companies’ sustainable transformation: CDP’s inaugural Corporate Health Check, for example, shows that nearly 80% of the companies that are on track to meet their climate targets link sustainability KPIs to executive pay.

Climate-friendly investments associated with higher profit margins

Even after adjusting for geography, government incentives and regulations, PwC finds that “making climate-friendly investments is associated with higher profit margins” – a result consistent with the consultancy’s previous analysis and surveys.

In addition, returns on climate investments are expected to increase as more economies decarbonise, levelling the playing field and lowering decarbonisation costs.