Investors Care More About Sustainability Than Many Executives Believe

By Gregory UnruhNina KruschwitzDavid KironMartin ReevesHolger Rubel, and Alexander Meyer zum Felde

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.