Finance CEOs starting to prioritise long-term sustainability over short-term profits, survey finds
New research has revealed that chief executives at financial services firms worldwide are increasingly prioritising environmental sustainability even at the cost of reduced profits, in a shift towards long-term responsibility.
This is according to PwC’s 27th Annual Global CEO Survey, conducted with 1,117 financial services chief executives across 105 countries and territories.
Among those interviewed, representing a mix of privately owned and publicly listed companies, there is a growing acknowledgment of climate change as a significant driver of strategic reinvention within the sector.
Over the past five years, 19% of chief executives cited climate change as a major driver, and looking ahead, 30% anticipate it will significantly influence their strategic adjustments for value delivery and capture over the next three years.
PwC UK’s financial services leader Isabelle Jenkins said: “Financial Services faces possibly one of its most significant challenges: how to align portfolios with the net-zero transition and create a positive effect in global markets without jeopardising returns, and many of the world’s biggest firms are still unsure how to navigate this shift.
“However, our research shows that firms are seeking a smooth transition to decarbonisation and using their portfolios to balance climate-related goals with their duty to meet performance targets.
“The willingness to accept lower returns for climate-friendly investments is a testament to the sector’s commitment to making a positive impact on the planet.”
The survey also found that 36% of the respondents are actively investing in nature-based climate solutions, with an additional 5% having already completed such transitions.
Climate action gaps
However, the survey also highlighted areas where action remains lacking.
While 30% of chief executives in the financial services sector now recognise climate change as a significant factor for corporate transformation in the next three years, only half of financial services firms are actively engaged in creating climate-friendly products as part of their commitment to sustainable solutions.
Additionally, while there’s a growing need for climate-related expertise, just under half of the firms are actively investing in enhancing the green skills of their existing workforce.
These findings come amidst growing concerns about the green skills gap within the UK’s financial services sector, as highlighted by PwC’s Green Jobs Barometer.
The report, in collaboration with the Financial Services Skills Commission (FSSC) and the Aldersgate Group, found that the proportion of job vacancies in the sector that are identified as green increased from 0.26% in the 2019-2020 timeframe to 2.2% in 2022-2023, growing from a total of 4,900 job listings to 16,700.
With the magnitude of green investments required to achieve net-zero objectives, both in the UK and worldwide, this growth is expected to accelerate.
Pension fund giant divests from oil companies
In related news, PFZW, a pension fund based in the Netherlands overseeing approximately $256bn, has announced a $3bn divestment from more than 300 fossil fuel companies, including Shell, BP and TotalEnergies.
This decision comes after the pension fund giant found the oil companies’ decarbonisation plans lacking, leaving only seven such companies in PFZW’s portfolio.
The divestment follows a two-year engagement process, during which PFZW progressively raised its expectations for oil and gas firms.
Initially, 114 companies were de-invested for failing to disclose emissions reduction targets. Subsequently, companies without a commitment to the Paris Agreement’s net-zero goal by 2050 were divested.
Finally, those lacking sufficiently robust plans to align with Paris Agreement goals across short-, medium-, and long-term horizons were removed.
Now, having concluded its engagement with oil and gas, PFZW is shifting its focus to major fossil fuel consumers, such as power companies and high-carbon materials producers, urging them to adopt ambitious transition strategies.