ESG Tops The Charts As Investment Priority For CFOs – EY

ESG tops the list of CFOs’ long-term investment priorities in a fresh survey released by global professional services firm EY, and at the same time, paradoxically, it’s also pinpointed as the most evident idea to go through budget cuts since the firms seek to push their short-term results.

For this study, EY’s Global DNA for the CFO Survey for 2023, it put forward a survey that happened to be conducted by FT-Longitude of 1000 CFOs as well as senior finance leaders across 21 nations and 13 sector segments, exclusively for companies having a revenue of more than $1 billion.

Urged to identify their top three long-term individual investment priorities for the next three years, ESG happened to emerge as the top choice, which was selected by 43% of the respondents. It was followed by technology and digital innovation, and thereafter by supply chain resilience.

Sustainability was also reported as the top 3 priorities when it came to transforming organisations’ finance operations in the next 3 years, with tech transformation as well as advanced data analytics holding the top 2 spots.

The report also went on to reveal that 50% of the leaders from finance said they are meeting earning targets that are short-term by eliminating investment across areas that are identified as long-term priorities, with ESG being at the top of the charts, with around 37% planning a near-term cut or stall in spending in ESG, followed by tech as well as digital innovation, and with talent and culture at 34% each.

Apparently, the need to come up with a long-term value while also facing pressure to slash priority investment areas happened to be one of the paradoxes that were faced by the CFOs, as the report identified, and also a major tension area that was reported by the finance leaders. Notably, two-thirds of the respondents went on to say that there happened to be disagreements between their leadership teams when it came to maintaining an equilibrium between long-term and short-term priorities.

This tension happens to be the most apparent for ESG, with the top challenge identified by 32% of the respondents reported this area as being a major difference of opinion within their leadership team on how to balance short-term financial performance with long-term investments and turn them into sustainability priorities.

As per EY, the impact when it comes to short-term and long-term priority imbalances gels with the results of yet another recent study, the Global Corporate Reporting and Institutional Investor Survey for 2022 by EY, as per which 80% of the investors happened to report that many companies fail to understand the rationale as far as long-term investments in sustainability are concerned.

The new EY survey happened to highlight the inferences of a bolder cohort of finance leaders, and that too within the survey respondents, who reported that they were looking to put efforts so as to significantly evolve how the function of finance operates within their setups and were also embracing culture change and digitization and also the development of the next-gen finance leaders. Within this group, 51% reported prioritising long-term ESG investment vis-à-vis 42% of other respondents, and almost half, i.e., 46%, went on to say that they strongly agree that ESG as well as sustainability have elevated attention when it comes to managing for the long term. This very same group, at 44%, was also even more likely to report a short-term cut in investment or halt climate change as well as ESG.