Investors Prioritising Sustainability Metrics

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by KnowESG
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By 2026, most publicly traded firms are expected to revise their investment strategies and include sustainability metrics in their return on investment (ROI) evaluations, as per Gartner.

The transition from perceiving sustainability as solely a risk management source to a driver of returns will bring about significant changes for numerous firms.

Many companies have shifted away from a risk-based approach to environmental, social, and governance (ESG) concerns and have begun to refine their initiatives to improve their reputation and attract clients, investors, and talent. The following phase in this development is to stimulate sustainability transformation by making ROI a vital aspect of their ESG strategies.

Melanie O'Brien, VP Analyst of Research in Gartner Finance practice, stated that chief financial officers (CFOs) have already reaped the benefits of prioritising sustainability and investing in small-scale, eco-friendly projects.

According to her, 60% of public companies will revise their investment approaches to incorporate non-financial information related to sustainability by 2026, enabling long-term and transformative sustainability investments.

O'Brien notes that traditional investment methods typically ignore the value of non-financial and intangible benefits in calculating investment returns. In contrast, companies that consider sustainability as a driver of returns have started to update their investment criteria, similar to how leading companies evaluate the non-tangible benefits of digital investments.

To be viewed positively by investors, Gartner recommends that organisations connect sustainable investments to their corporate strategy, demonstrate their enterprise value, and show clear benefits.

CFOs are advised to update their investment methodologies by considering investments that demonstrate significant nonfinancial benefits, tolerating longer cash back periods, leveraging established accounting models, and assessing geographic portfolios for divestment opportunities that conflict with stated ESG objectives.

Gartner predicts that 30% of multinational organisations will streamline geographies and subsidiaries by 2026 due to sustainability regulatory requirements.

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Source: IT Online

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