CEOs on Creating Value with Climate Action

Overview:

In a recent survey by PwC, 4,700 CEOs shared their insights on how climate action can drive business value. Despite the challenges, many CEOs are finding that addressing climate-related opportunities and risks can lead to better financial performance.

Summary:

CEOs are increasingly recognizing the financial benefits of taking action on climate-related opportunities and risks. PwC’s annual CEO survey found that companies engaging in climate-friendly investments tend to have better financial performance. Despite this, many CEOs still struggle with the perceived lower returns on such investments. However, the growing emphasis on sustainability is pushing more leaders to integrate climate action into their core business strategies.

The Climate Action Conundrum

While CEOs recognize the seriousness of the climate crisis, only 30% believe it will drive shifts in their business models over the next three years. This is significantly lower compared to the 56% who see technology as a key driver. Many CEOs are still skeptical about the financial returns of climate-friendly investments, with about half citing lower returns as a barrier to decarbonization.

Financial Performance and Climate Action

Interestingly, the survey reveals that companies taking more action on climate-related opportunities and risks tend to have better financial performance. CEOs who reported their companies are actively addressing climate issues also reported higher profit margins and revenue growth.

Source: PwC’s 27th Annual Global CEO Survey

Trade-offs Not Required

The data suggests that climate-friendly investments do not necessarily come at an extra cost. Companies that apply their normal hurdle rates to these investments have similar profit margins to those that set lower rates. This indicates that the financial downside of climate action may be minimal.

Source: PwC’s 27th Annual Global CEO Survey

In summary, the survey highlights that while there are challenges, the logic of value creation through climate action remains sound. CEOs who embrace climate-related opportunities and risks can potentially achieve superior financial performance.

Source: https://www.pwc.com/gx/en/issues/esg/ceos-creating-value-climate-action.html?WT.mc_id=GMO-CLM-NA-FY25-NZT-NZCP-T64-CI-XLOS-ART-GMOS00043-EN-OSLI-T1