Despite Anti-ESG Attacks, New Study Shows Investors See Climate as Critical to Business Performance

By Michael Maslansky and Will Howard

In February, a group of major financial services firms withdrew from Climate Action 100+, a coalition of investors pushing companies to cut carbon emissions.

It was just the latest response to a conservative backlash against corporate environmental, social, and governance (ESG) policies. In a year that saw billions in net outflows from ESG-related investments, more than 100 attempts to pass anti-ESG legislation around the U.S. (which largely failed), and countless articles prematurely writing ESG’s obituary, a new caution around ESG may have seemed like a reasonable response.

But many of these organizations overlooked a key 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:

• Investors believe publicly held financial services companies have a responsibility to take a range of climate-related actions.

• They feel investments related to the clean energy transition will outperform most other sectors and earn investors money in the short and long term.

• They recognize that climate risks are significant business risks that, if ignored, could hurt the financial performance of companies and investment portfolios.

Partisan Differences, Overall Consensus

Investors agree across party lines that companies should avoid political advocacy and focus on business.

According to our 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.”

Not surprisingly, the line between what is or is not political depends on your politics.

We 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.

Yes, climate can be political, and yes, there is a partisan gap. But most investors now clearly associate climate action and the clean energy transition more closely with business performance than with political advocacy.

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 our 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. Our 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 also 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 ‘ROR’ of Climate Investing

As many companies evaluate their commitments and communication on climate, they should heed investor perspectives. Partisan gaps exist, but investors agree that clean energy technologies and climate risk mitigation are good for business. Despite negative headlines, investor consensus strongly favors companies willing to lead on the clean energy transition.

Companies can navigate political risks by sticking to “ROR”: connecting their climate actions to being a responsible business, to the growth opportunities of the clean energy transition, and to the tangible climate risks that can affect business performance.

Learn more from maslansky+partners about how investors view climate action.

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: 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.