Climate Change Report: A finance and investor perspective
By Tim Field, Associate Director
At the heart of any company’s success is its ability to grow its customer base, thereby contributing to increasing revenues and ultimately value for shareholders. This growth agenda for every business has another backdrop. With climate pledges in abundance, a glut of metrics for assessing ESG factors and a challenging environment for financial markets – can companies embrace the broader sense of value to deliver for their shareholders? And, can they afford not to?
A company’s growth comes from many places such as new products or services that are in demand, demonstrating best quality at right price or expansion into new markets. Brand value also plays a significant part in this potential growth and an increasing component of that is how the company acts and is perceived.
This will sound like stating the obvious to many, but when only 30% of people believe companies are taking sufficient steps to tackle climate change, what also needs to be plainly understood is that the decisions and actions a company takes to create a more sustainable business will impact the perceptions of their customers, investors and other stakeholders.
Recent global events have shown the force with which stakeholders, and critically investors, are asking tough questions of companies. The impact of Covid was widespread, no individual or business was immune from its effects. However, companies who took public money to protect their business were expected to later demonstrate they needed to keep it post-pandemic. Those who went on to pay dividends or give bonuses faced public and private criticism. The challenge was laid down – what was each company doing to better help humanity? The Russian invasion of Ukraine has been another tipping point for the actions of multinationals with those continuing their operations in Russia facing a backlash and investors deserting them.
Expectation and value creation
When almost 4 out of 5 people believe in the urgency of tackling climate change, how a company addresses its emissions and those of its supply chain will influence customers’ perceptions. Add to this the view that people believe companies and brands should bear the next biggest responsibility for tackling climate change after governments, and that part of a company’s value or its ability to grow its customer base that is derived from. Worryingly, only 29% of people trust companies’ actions on climate change. Walking the walk, rather than simply talking the talk has never been so important. It is part of what dictates value.
Companies aren’t alone. The expectations on governments are significantly higher and individuals know they need to take action too. Companies can rise to the challenge and meet the expectations of their stakeholders. They can demonstrate the actions they are taking and be
part of the solution. Brands and companies can support consumers to make choices that have the biggest impact on climate change.
By collectively accelerating change, companies can show they are alongside the public in this effort. This is both the right thing to do and one that creates value.