CFOs Prioritize Sustainability Investments For Growth

A recent report by Kearney, Staying the Course: Chief Financial Officers and the Green Transition, shows that sustainability is no longer an ancillary issue for corporate finance executives—it is emerging as a strategic imperative. Chief Financial Officers (CFOs) are now realizing that investments in sustainability can yield high financial returns, sometimes even surpassing those from conventional investments. The survey, conducted of 500 CFOs in the UK, US, UAE, and India, indicates a striking corporate financial turn toward sustainability with 69% of CFOs anticipating greater returns from sustainability drives over traditional investing.

Corporate managers are doubling up on sustainability spending despite economic turbulences and fiscal pressures. A resounding 92% of CFOs intend to boost their net sustainability investments in 2024, reflecting a widening perception that green projects are not only moral obligations but also lucrative opportunities. The focus on sustainability is becoming integrated into overall financial plans, with 94% of CFOs incorporating sustainability into investment choices. This change signals a revolution in corporate finance in which environmental and financial objectives cease to be thought of as antithetical and are instead envisioned as mutually complementary.

Balancing Risk and Reward

Although investment in sustainability is increasingly popular, the shift comes with its fair share of hurdles. The report determines that 93% of CFOs believe there is a business case for sustainability, yet fully 61% are still attuned only to short-term expenses and not to long-term value creation. This conflict between short-term fiscal pressures and long-term rewards raises the current debate within companies regarding what to do. Yet increasingly, there is recognition of the cost of inaction—65% of CFOs are now actively quantifying the risks of inaction on climate issues. This indicates an awareness that postponing sustainability action may lead to regulatory fines, operational interruptions, and reputation damage.

Beth Bovis, Kearney Partner and Global Sustainability Lead, stresses the important role of CFOs in corporate sustainability. "CFOs' point of view is too frequently left out of the corporate sustainability discussion, when it should be front and center," she comments. Historically centered on cost management and bottom-line performance, CFOs are increasingly becoming key to strategic sustainability decision-making. Their capacity to manage risk, reward, and regulatory needs will decide how successfully companies make the shift to more sustainable business models.

Where CFOs Are Investing

CFOs are not only committing to sustainability; they are actually steering capital towards initiatives that deliver financial as well as environmental returns. Three areas of key investment are recognized in the report: expanding the use of sustainable materials, driving sustainable innovation and collaboration, and optimizing energy management and waste reduction. These actions are aligned with corporate objectives of lowering emissions, enhancing efficiency, and fulfilling stakeholder expectations of responsible business conduct.

One of the most significant changes in investment approaches is the increasing convergence between sustainability and employee-related financial choices. The report finds that 71% of CFOs now include sustainability in employee retirement fund choices. This is a reflection of the rising pressure from employees and investors for businesses to integrate environmental, social, and governance (ESG) factors into financial planning. By incorporating sustainability into retirement accounts, businesses not only recruit socially responsible talent but also reaffirm their long-term commitment to responsible investing.

In addition, the report highlights that sustainability is not merely a compliance anymore—it is a route to value creation. That 94% of CFOs integrate sustainability into their overall investment strategy is an indication of how firmly ESG factors are rooted in corporate finance. This transformation is changing the financial dynamics, turning sustainability into a fundamental element of long-term business success and not a standalone effort.

The CFO's Growing Role in ESG

As sustainability reporting guidelines continue to develop, CFOs are being asked to have more influence over corporate ESG strategy. The UK government this year will introduce new Sustainability Disclosure Standards that are expected to lead companies to consider how they currently measure and disclose their climate impact. This regulation puts CFOs in a very important position, not just ensuring compliance but making investments that drive emissions reduction as well as create commercial value.

Beth Bovis has noted that ESG reporting is becoming more part of the CFO's role. "Beyond compliance, CFOs can lead investments that reduce emissions and increase commercial value," she says. This reflects the increasing role of the financial leader in sustainability, beyond conventional financial reporting to shape corporate strategy more widely.

Ingmar Rentzhog, We Don't Have Time's Founder and CEO, concurs, adding that CFOs are taking on more of their company's sustainability work. "Our studies indicate that they are ready for this challenge," he asserts. This trend is fueled by several factors: investor expectations, regulatory demands, and the discovery that sustainable business practices can drive profitability.

The Kearney report findings reveal a consensus building: sustainability is no longer a regulatory cost—it is a financial opportunity. Those companies that do not incorporate sustainability into their financial plans risk being left behind, while those that do are setting themselves up for long-term success. CFOs are no longer simply controlling costs; they are defining the future of business by making sustainability and profitability synonymous. With leaders in finance ever more focused on green investments, the business landscape is undergoing a fundamental shift—a shift where sustainability is no longer an option but a strategic imperative.