CFOs invest in sustainability amid a rocky economic climate

Article written by Tim Mooney

The state of current global affairs leaves much to be contested about the health of the economy over the coming years. In particular, 2024 was a year of growing concern that investment in the green economy would slow. This could be due to the election of anti-climate Trump in the U.S., and deflated enthusiasm surrounding global commitment to the 2015 Paris Agreement.

However, research from Kearney in partnership with We Don’t Have Time suggests a more positive investment outlook for the green economy. Surveying more than 500 CFOs across the world, the research aimed to capture appetite, interest, and direction among global CFOs.

CFO interests

Of the 500+ CFOs who responded to the survey, 92 per cent said they will increase current investments in sustainability, and more than half said “significantly increase.” This suggests businesses are accelerating their commitment to sustainable growth and exploring carbon cutting solutions.  

The priority for CFOs seems to be immediate emissions reductions, most likely to align with industry and government-wide emissions regulations and targets. Surveyed CFOs said their planned investments will focus on:

• Using more sustainable materials
• Driving sustainable innovation
• Managing energy
• Reducing waste
• ESG regulations and ratings

Action or inaction

Aside from an expanding regulatory landscape influencing sustainable investments, 69 per cent of CFOs expect a higher return on investment (ROI) from sustainability initiatives compared to conventional investments. However, 61 per cent reported viewing sustainability as a cost decision, rather than something that creates value. This tells us that while CFOs see potential long-term gains from sustainability investments, present financial pressures and uncertainties are slowing, or even blocking, decisions to invest in sustainability.

Running parallel to this is the perceived cost of inaction. A growing number of businesses believe that making no efforts to invest in sustainability will cause them to fall behind, lose competitiveness in their industry, or make it harder to catch up with other organisations in the future. This means CFOs are weighing up evaluation models that position the costs of investing now, with the costs of falling behind. 65 per cent of CFOs say they already measure the cost of inaction and associated financial risks of falling behind on sustainable business transitions.

What CFOs gain from sustainable investments

Leaning into the core value of sustainable investments will help speed up the transition.

Firstly, sustainable investment stands to create company value by ensuring investments deliver measurable environmental, social, and financial returns. What’s more, organisations seen to be pursuing impactful sustainable investments are more likely to appeal to prospective employees, attract investors, and appeal to customers interested in the environmental credentials behind the products and services they purchase.

Sustainable investment can also enhance transparency, leading to closer collaboration. As a growing number of organisations turn the spotlight on their emissions and environmental impact, they will look all through their value chain to assess how their partner businesses fare. Being ahead of the curve with sustainable business will prepare an organisation for inevitable conversations about carbon footprints and impacts.

How can further action be inspired

With 92 per cent of surveyed CFOs looking to increase sustainable investment, its important to create a sustainable investment landscape that inspires commitment. For this to happen, the following is needed:

• Sustainability needs to be reframed as a driver of value.
• More green finance and funding packages need to be made available to businesses to subsidise the costs of investment.
• Data quality must be improved to give organisations a clear understanding of their footprint and what impact certain sustainable investments will have on their business.
• Sustainability should be instilled as a value across the entire business, including staff, management, stakeholders and shareholders.
• Industry-wide initiatives should be established and explained to encourage collective action and progress.

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