A highly interesting survey from McKinsey!
A clear majority of surveyed executives and investment professionals agree that ESG programs create shareholder value, both short and long term. The share has come up clearly since the previous survey (in 2009). Respondents showed even willingness to pay a 10 percent median premium to acquire companies with positive ESG records over ones with negative records.
Somewhat surprisingly, according to the survey, the percentage of those respondents (especially investment professionals) that do not believe ESG programmes have a positive effect on shareholder value has simultaneously increased from 14% to 25%. It would be really interesting to get an explanation for this!
ESG performance appears to be more and more associated with overall management quality. Maintaining a good corporate reputation and being able to attract and retain talented employees are still perceived to be the most important ways of how ESG performance contribute to financial performance (though e.g. meeting society’s expectation has increased its importance).
According to the survey, by far the most important aspect of ESG activities is complying with regulations and meeting accepted industry (up to 45 % from the 35 % in 2009). This I understand to reflect the intensified regulation and increased weight of e.g. environmental issues on political agendas in western countries.
What raises questions is that according to the survey, “Creating revenue streams by using ESG objectives to identify new products, customers and/or geographic markets.” does not appear to be very important ESG aspect for respondents (only 13 % ranked it most important, down from 14 % ten years earlier). Can this be interpreted to present bad news for financing the UN SDGs, especially in potentially less attractive emerging markets and developing economies?
That especially the interviewed investment professionals want ESG data that “are more standardized, better integrated with financial data, and readily benchmarked” is no surprise. There is still a lot to do in this field, to make for example ESG reporting more credible and applicable in the eyes of investors.
The survey report can be found here: https://www.mckinsey.com/business-functions/sustainability/our-insights/the-esg-premium-new-perspectives-on-value-and-performance?cid=other-eml-alt-mip-mck&hlkid=094ec1bbb13d4919b7c3bafc62255319&hctky=11281933&hdpid=49151918-fa5e-40af-b158-779aec1aeafc