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How sustainability has expanded the CFO’s role - Investor relations and sustainability - EY - United States

How sustainability has expanded the CFO’s role

Investor relations and sustainability

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Sustainability has become embedded in CFOs’ traditional areas of focus.

Banks, insurance companies, private equity funds and other institutional investors are now considering the sustainability rankings of the companies in which they invest.

As sustainability issues intertwine with business strategy, institutional investors are starting to view financial and non-financial performance together. Good IR can be a key factor in the price of a company’s shares and the interest rate it pays on its debt, so CFOs must stay up to date on their companies’ sustainability policies.

  • Shareholders speak out. Shareholder voting patterns provide convincing evidence of investors’ belief that a company’s social and environmental policies correlate strongly with its financial performance. Sustainability is also influencing corporate governance, as shareholders pay closer attention to resolutions that tie social and environmental performance to issues such as compensation and the qualifications of board members.
  • Ratings agencies evaluate sustainability. Credit-rating agencies have long provided shareholders with a source of company information. In a departure from their traditional focus, they now want to know about companies’ sustainability practices, as do the more specialized providers of sustainability ratings.

Market pressures are requiring IR communications to provide more in-depth sustainability reporting. Everyone in the IR department should be fully aware of all sustainability initiatives and performance metrics across the organization. CFOs and their immediate reports must help corporate IR teams in this undertaking.

Actions to consider
  • Develop a sustainability story for your organization.
  • Learn about the sustainability rating agencies to prioritize ratings most vital to your organization.
  • Pay attention to sustainability-related shareholder concerns and advise on which issues to pursue.
  • Take preemptive action on sustainability issues - act rather than being forced to react.

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