How CEOs can catch up to investors on climate action

Two recent PwC Surveys—the 26th Annual Global CEO Survey and the Global Investor Survey 2022—shed light on a significant gap between investor expectations on climate action and how well executives are meeting those expectations. The chart above singles out five key actions companies can take to mitigate emissions and build resilience against the threats posed by climate change. The findings show that the share of CEOs reporting progress on those actions is considerably smaller than the share of investors who say those actions are effective. How can executives close this gap? They should start by doing three things: 

1. Lay out a clear financial case for climate action. Three-quarters of investors surveyed said that the energy transition will have a large or very large impact on company profitability during the decade ahead. At the same time, investors also said that their top two priorities for companies are profitability and innovation, with greenhouse-gas reduction coming in fifth. So, when making the case for climate action, CEOs would do well to ground their logic in financial considerations. 
2. Maintain and demonstrate financial discipline. Four out of five investors (81%) say they would accept no more than a one percentage point reduction in overall returns for companies in their portfolios that take sustainability actions relevant to their business. Many also said that they want to see companies disclose the effect of sustainability risks and opportunities on their financial statement assumptions (70%), the relevance of sustainability factors to their business model (69%), and their external impact on the environment or society (60%). To meet these stringent expectations, many CEOs will have to apply financial discipline to their climate programs. 
3. Improve the relevance and quality of sustainability reporting. Many investors don’t put a lot of stock in the sustainability reports and disclosures issued by companies. A stunning 87% say they believe that sustainability reporting contains at least some greenwashing. Disclosing more of the information that investors care about could go some way to improving the relevance of sustainability reports.

By heeding these three imperatives, and by striving to link climate action with value creation, CEOs can provide the leadership that the capital markets are seeking.