James P. Gorman, Executive Chairman of Morgan Stanley | Columbia Business School
Corporates worldwide see sustainability primarily as a value creation opportunity, according to a new “Sustainable Signals” report by the Morgan Stanley Institute for Sustainable Investing. The survey polled over 300 private and public companies across North America, Europe, and APAC to understand how sustainability factors into their businesses and where their organizations see the greatest opportunities and challenges.
“Sustainability strategies and core business strategies are converging, with companies increasingly seeing sustainability factors as integral to the company’s long-term value creation,” says Jessica Alsford, Chief Sustainability Officer at Morgan Stanley and CEO of the Institute for Sustainable Investing. "There may yet be challenges in developing expertise and financing models, but corporate leaders view sustainable business practices as fueling the creation of value as well as the mitigation of risk.”
A majority of survey respondents (85%) see sustainability as a value creation opportunity for their long-term corporate strategy, and half of companies say it is a "very significant" reason for pursuing a sustainability strategy. Other top motivations are regulatory compliance and a company’s moral responsibilities. Expectations from external stakeholders such as lenders and wider civil society saw much lower response rates.
The top barrier deemed “very significant” to delivering on sustainability efforts is the high level of required investment (31%), followed by conflicts with the financial goals of the company (28%) and macroeconomic uncertainty (25%). Overall, investment needs ranked 1.5 times higher compared to other barriers, such as lack of corporate leadership or employee skills.
Key survey findings include:
Financing Sustainability Strategies: Respondents indicate that access to capital is vital, with 84% saying support from investors is important to deliver their sustainability strategies. 76% believe that sustainability measures could drive a lower cost of equity and/or debt for their company over the next five years. Only 42% say they are meeting or exceeding expectations around aligning corporate financing with their sustainability strategy.
Integration of Sustainability into Business Decisions: A majority of companies (55%) say their key business functions – including capital expenditures, research and development, new products, and mergers and acquisitions – are subject to sustainability criteria. However, just over one third agreed that their company’s board has sustainability expertise. The most commonly cited shortfall in board expertise is around sustainability-related regulations (57%).
Impact of Climate Change on Business: Nearly all respondents (92%) expect climate change to impact their business model by 2050, with 23% noting that it already has made an impact. This puts climate on par with more traditional business risks including technological change, competitor actions, geopolitical conflict, and supply chain instability.
The Sustainable Signals series was launched in 2015 and measures the views of individual investors, institutional investors, and businesses on sustainable investing. The first survey of corporates in the series, this new report is being released in conjunction with Morgan Stanley’s 2024 Sustainable Finance Summit (May 21-22) in New York City.
For further information about Morgan Stanley or its Institute for Sustainable Investing visit www.morganstanley.com/sustainableinvesting.