Key Points
- In February, major financial firms withdrew from Climate Action 100+ amid conservative backlash against ESG policies
- Despite this, research shows investors strongly support climate action and see clean energy as a growth opportunity
- Investors believe climate risks are critical to business success and that responsible businesses will outperform others
- While partisan differences exist, most investors agree that focusing on climate action benefits financial performance
Summary
Amid growing conservative opposition to corporate ESG initiatives, some financial firms have pulled back from climate commitments. However, recent research highlights that investors still see strong value in climate action. Despite political risks, a majority of investors—including many Republicans—believe that companies focusing on clean energy and mitigating climate risks are more likely to succeed financially. They also view the clean energy transition as a lucrative growth opportunity. Investors, therefore, expect businesses to prioritize environmental responsibility, aligning climate actions with business performance, even as partisan debates continue.
Survey asks the question – what do investors want?
Do investors care whether financial services firms take climate-related actions such as reducing their climate impact, mitigating their climate risks, or investing in clean energy opportunities? Does clean energy represent a significant growth opportunity for asset managers? Are climate risks material to evaluating investments?
The answer to each of these questions is a resounding yes. Recent research among affluent and high-net-worth individual investors shows that while financial services companies and asset managers must be mindful that certain actions—and certain language used to communicate these actions—carry the risk of partisan backlash, they should not let these risks overshadow investors’ clear expectations about climate action and the potential of clean energy.
This research showed the following:
According to the recent survey of 1,000 affluent and high-net-worth individual investors in the U.S., two out of three investors—the same ratio as among the general population—believe it is inappropriate for companies to “take stances on political issues.” And half of investors believe that when financial services companies “take action on climate,” they are indeed “taking a political stance.”
The survey tested a range of 34 climate-related actions a financial services company might take, including efforts to reduce impact on the environment, improve performance by investing in climate-related investments, and mitigate business risks from a changing climate.
Republicans were significantly less likely than Democrats—by an average of 30 percentage points—to expect financial services companies to take action, to believe climate investments will outperform other investments, and to see climate risk as material.
But these differences mask the more important reality: regardless of party, investors think companies that focus more on climate and clean energy will be more successful.
Across those 34 climate-related actions, investors preferred the pro-climate position by an average of 4:1 (60% to 15%). Even among Republican investors, the average response favored the pro-climate position by 5:3 (45% to 27%). On every action we tested, we saw more support than opposition.
Three investor insights on climate
1. Investors believe environmentally responsible business is good business.
Much criticism of ESG and sustainable investing argues that investors have to choose between performance and impact. By overwhelming margins, investors reject this conclusion.
Nearly all investors (88%) believe that companies considered “responsible businesses” are viewed as more likely to care about the environment than other businesses and more likely to succeed financially, according to the survey. And critically, three out of four investors (77%)—including 61% of Republicans—explicitly believe that “environmentally responsible companies are more likely to succeed financially.”
2. Investors believe the clean energy transition is a growth opportunity
Environmental responsibility is increasingly associated with positive financial returns. The research showed that 70% of investors believe “there is a lot of money to be made in the clean energy transition.”
Some 65% of investors expect “clean energy technology” to outperform the market over the next year. And they believe that over the next decade, it is more likely to outperform the market than any sector except artificial intelligence.
For investors, the future is clean: nearly 80% believe that “publicly held financial services companies that invest in the clean energy transition are more likely to succeed financially.”
3. Investors believe climate risk is a business risk
Investors recognize that a changing climate increasingly poses significant risks to business and investment performance.
The survey indicates that 60% of investors believe climate change can affect the performance of publicly held financial services companies. And 82%, including 69% of Republicans, believe that “publicly held financial services companies that better anticipate environmental risks are more likely to succeed financially.”
The ROI of climate investing
As companies reassess their climate commitments and messaging, it’s important they consider investor viewpoints. While partisan divides are evident, there’s broad consensus among investors that clean energy technologies and climate risk management are smart business strategies. Despite negative press, the majority of investors support companies that take the lead in the clean energy transition.
To navigate the political landscape, companies should focus on “ROI”: aligning their climate actions with responsible business practices, capitalizing on the growth potential of clean energy, and addressing the real climate risks that impact business performance.
Authors
Michael Maslansky is the CEO of maslansky+partners, a language strategy consultancy, and the author of The Language of Trust: Selling Ideas in a World of Skeptics.
Will Howard is a senior vice president with maslansky+partners.
Methodology
Methodology: Research was conducted online with a representative sample of 1,000 investors across the U.S. All participants had investable assets greater than $150,000 outside their primary residence; 55% had assets greater than $500,000; and 25% had investable assets greater than $1,000,000.
Source: Harvard Business Review
