In a recent survey, ESG investment was the top long-term investment priority for CFOs, even though it is the most likely area to experience near-term budget cuts.
The survey, conducted by FT-Longitude, involved 1,000 CFOs and senior finance leaders across 21 countries and 13 industry sectors. Sustainability also ranked in the top 3 priorities for finance function transformation within organisations over the next three years.
Paradoxically, despite identifying ESG as a long-term investment priority, half of the finance leaders indicated they are achieving short-term earnings targets by reducing funding in areas recognised as long-term priorities, with ESG being the primary focus. About 37% of CFOs are planning a near-term cut or pause in ESG spending. This tension between short- and long-term priority investment is creating challenges within leadership teams, with significant differences of opinion on balancing short-term financial performance with long-term investments in sustainability.
The EY survey also highlighted a bolder cohort of finance leaders who are looking to significantly evolve the finance function in their organisations through digitisation, culture change, and developing the next generation of finance leaders.
Even though 51% of this group prioritised long-term ESG investment, this group was even more likely to report a near-term cut or pause in climate change and ESG spending, at 44%.
EY Global and EY Americas Strategy and Markets Leader, Financial Accounting Advisory Services (FAAS), Myles Corson said, “CFOs should articulate a strategy for long-term value while setting achievable targets and implementing effective performance management. Transforming the finance function will likely require a cultural shift, fostering new mindsets and behaviours within the team.”
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