Carolyn McMaster | July 19, 2016
New sustainability research from the Boston Consulting Group and MIT Sloan Management Review verifies what we have strongly suspected: three-quarters of investors care about whether the companies they invest in have good sustainability performance. They want a strong sustainability story.
However, few companies “make it a priority to communicate their sustainability performance to investors, or even develop a robust story about their sustainability performance,” conclude the authors of Investing for a Sustainable Future. The report analyzes the survey responses of more than 3,000 business leaders and corporate investors, with context and examples provided by interviews with experts from a variety of industries. (Earlier research has covered the same territory, but this report shows how things have changed in a short time.)
Beyond fringe investing
The research is a strong indication that sustainability is now a factor for mainstream investors. Few of the investors surveyed identified as socially responsible, yet most said sustainability initiatives deliver tangible value, such as reduced risk, increased operational efficiencies and better revenue potential. Nearly half said they wouldn’t invest in a company with poor sustainability performance, and 60 percent said they would divest from companies “with a poor sustainability footprint.”
That support makes the persistence of sustainability communication gaps all the more notable. The survey shows that 80 percent of C-suite executives and board members are fully informed about their companies’ sustainability initiatives, but only half of middle managers feel in the know. Companies are not adequately telling their story to investors, either: the issue comes up in just over half of earnings calls.
Investors are in the dark
The report points out that the lack of communications is no accident. It cites MIT Sloan Business Review research performed in 2015 with the National Investor Relations Institute that found only 24 percent of investor relations professionals are asked to tell investors about the bottom-line value of sustainability. About 40 percent get no direction on sustainability reporting and nearly 80 percent (!) don’t include sustainability talking points in investor presentations.
This communications failure is significant. As the report points out, in order to tell the sustainability “value creation” story, a company must have a sustainability strategy, make the business case and change its business model to provide the benefits. Doing this requires strategic communications. With a compelling sustainability story and regular progress reports, companies can educate and inspire internal as well as external audiences, and start to realize full value from their sustainability investment.