In response to the escalating challenges posed by climate change, business leaders globally are intensifying their commitment to sustainable practices. Despite another year marked by climate extremes—including severe heatwaves, droughts, and catastrophic floods that pushed the global average temperature to 1.48 degrees Celsius above pre-industrial levels—CEOs are steadfast in their efforts to decarbonize and achieve net zero emissions.
The latest quarterly EY CEO Outlook Pulse survey of 1,200 executives globally highlights that over half (54%) of CEOs now prioritize sustainability more than they did a year ago. However, it’s concerning that a quarter of them have placed less emphasis on these crucial initiatives due to immediate financial pressures.
The focus on sustainability is not just a moral imperative but a strategic one, evidenced by significant investments in sustainable practices. Yet, as the early phase of easy wins concludes, companies face the complex challenge of deeper integration of sustainability into their core operations. The study reveals that 77% of CEOs believe sustainability will increasingly affect their supply chains and ecosystems, and 76% underscore the necessity for consistent governmental action to tackle climate change effects.
Among the emerging consensus is the acknowledgment of the risks posed by ESG factors, including regulatory changes leading to stranded assets. About 74% of CEOs agree that this is a pressing concern, necessitating a balanced approach to future-proofing their portfolios through a sustainability lens. This sentiment is echoed by 67% of institutional investors who fear their investments are jeopardized by similar ESG factors.
The dialogue around sustainability extends to the broader financial and regulatory community. Institutional investors and CEOs alike recognize the need for greater governmental collaboration in policy-making to effectively address climate impacts. Notably, half of the CEOs reported that regulators have actively sought their sector’s input in shaping significant sustainability-related regulations, a crucial step in ensuring that these policies are practical and impactful.
On the policy front, there is a clear preference for incentives over penalties to encourage the transition to a net-zero economy. CEOs strongly support policies like those under the EU Green Deal and the US Inflation Reduction Act, which provide subsidies and tax reliefs for investments in green technologies. This approach not only promotes a faster adoption of new technologies but also positions the renewable energy sector to capitalize on increased global demand and accelerate the transition.
Moreover, the role of infrastructure investment in supporting sustainable business growth is widely acknowledged. Government initiatives aimed at enhancing renewable energy infrastructure are seen as pivotal. With 52% of CEOs highlighting the importance of energy transition infrastructure, it is clear that strategic governmental spending can significantly propel the sustainability agenda forward.
However, the transition to a low-carbon economy is complex and multifaceted, involving multiple stakeholders. The global trends, consumer engagement, and technology breakthroughs suggest a diverse and non-linear journey towards a new energy future. Institutional investors concur on the critical role of government in facilitating infrastructure investments, which are essential for economic growth and sustainability in their primary markets.
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