Sustainability initiatives outperform traditional investments: report

A survey of more than 500 Chief Financial Officers has found that 69% expect higher returns on sustainability initiatives compared to traditional investments.

CFOs have confidence in the long-term value and profitability of sustainable investments, with 69% of CFOs expecting higher returns on sustainability initiatives compared to traditional investments, a new report from consultancy Kearney has found.

The study also found that 92% of CFOs expect their organisations to significantly increase net investment in sustainability this year, despite a backdrop of geopolitical uncertainty and increased financial pressure.

The research, Staying the Course: Chief Financial Officers and the Green Transition, surveyed 500 CFOs across the UK, US, United Arab Emirates (UAE), and India, to understand how CFOs are embedding sustainability within their strategies.

Financial risks and business cases

Although the vast majority of CFOs - 93% - recognise the business case for sustainability investments, 61% still view these sustainable investments through a cost-focused lens, rather than considering the long-term value they may generate.

On a positive note, 65% are now measuring the cost of inaction, signalling an increasing awareness of the long-term risks posted by climate change and regulatory penalties, as well as opportunities related to green transition.

Taking immediate action

The research highlights that CFOs are focusing on sustainability investments that offer clear, short-term benefits in reducing emissions. The top three investment areas that ranked highest are increasing the use of sustainable materials, driving sustainable innovation and partnerships, and enhancing energy management and waste reduction.

Beth Bovis, Partner and Global Sustainability Lead at Kearney, said: "As those in control of financial levers, CFOs are uniquely positioned to have a long-term impact on business strategy. And our study highlights that they're already taking steps in this direction.

"ESG reporting is increasingly falling under the CFO's responsibilities. But beyond simply ensuring regulatory compliance, CFOs can lead the charge in driving investments that not only reduce emissions but also deliver tangible commercial value for the business."

Workforce and investment strategies

CFOs are also responding to increasing pressure from employees to align their financial strategies with sustainable practices, with more than 71% considering sustainability when selecting employee retirement funds.

As ESG awareness rises, the findings suggest that CFOs are also recognising the value of sustainable investments that both benefit the planet and resonate with values-driven investors and employees. As such, an overwhelming majority (94%) of CFOs now incorporate sustainability considerations into broader investment decisions.

Ingmar Rentzhog, Founder and CEO at We Don't Have Time, added: "Finance chiefs are increasingly absorbing more of their organisation's sustainability efforts, and our research shows that they are more than prepared for this responsibility."

With the UK government set to release its Sustainability Disclosure Standards this year, organisations will be forced to rethink how they measure and communicate their climate initiatives. “CFOs will be crucial in navigating these changes, as they must assess and disclose their environmental impact, adding a new layer to financial reporting," Rentzhog noted.