How to Attract Mainstream Investors to Green Companies

How to Attract Mainstream Investors to Green Companies

Readers of these pages hardly need to be told that leading businesses are shifting their perceptions of sustainability from compliance and cost-reduction to innovation, opportunity and growth.

But while we see some compelling examples of pioneering companies creating new value through sustainability, whether through operational improvements or market-facing innovations, it is not yet a well-trodden path. And one of the reasons, as we've uncovered through our research with the C-suite and institutional investment decision-makers, is an almost complete disconnect between those two groups.

Collectively the mainstream investor community (MIC), made up of institutional investors, Chief Investment Officers, asset managers, wealth management professionals, and capital markets, have resoundingly stated "Don't talk to us about sustainability. We care about high performance, return on capital, risk, operational efficiency, growth and innovation, talent strategies..."

At the same time, leading companies the world over are increasingly staking much of their growth and innovation around -- you guessed it -- sustainability-driven initiatives. Further, they're leveraging sustainability to help them reduce cost, attract talent, manage their risk, and enhance their intangible assets.

So why the disconnect? One reason is that many in the MIC have a limited view of sustainability. They've been trained by business schools and environmentalists of old to see sustainability purely as a burden, a risk, a corporate citizenship topic. And some of the blame must be shared with business leaders, who have struggled to find ways to articulate the real value of sustainability initiatives in ways that the MIC understands.

According to the 766 CEOs we surveyed with the U.N. Global Compact on sustainability issues, 72 percent said sustainability should be part of discussions with financial analysts. But only 48 percent admitted they had achieved that. And only 22 percent of CEOs believe that investors will be key stakeholders in driving their actions on sustainability in the next 5 years.

That matters because our research shows there's a massive gap between the opportunity for new sustainability-driven business models, products and services and the funds available to finance them.

That's why UBS and Accenture co-hosted an event of genuine significance last week -- the first of its kind -- the UBS Accenture Sustainable Innovation conference at the Bloomberg headquarters in New York. And if the packed conference was any indication, the MIC may care about sustainability more than anyone, including themselves, might have thought.

This elucidating event brought together academics, such as Michael Porter from Harvard and Sir David King from Oxford, experts like UBS Managing Director of Global Economics Paul Donovan, blue chip companies like Pepsico, Best Buy, NRG, General Mills and NBCUniversal, and technology leaders like Cisco, C3 and SAP.

Above all, it brought some of the most influential members of the MIC into a dialogue about how sustainability is driving growth, innovation, and new business value. And by demonstrating that in measurable and material ways familiar to investors, it created a richer, more comprehensive conversation about how to unlock the funding of new opportunities.

But we're only at the beginning of this conversation. To take it forward, much of the effort will have to come from the CFO. In a report we just published with the Chartered Institute for Management Accountants, we recommend how CFOs can identify the value of sustainability initiatives and measure the resulting business performance improvements.

They'll need to apply new tools and information to manage sustainability performance, to quantify the value and integrate metrics into existing business planning and reporting processes.

While the CFO must quantify the value of sustainability initiatives and the CEO must effectively communicate the message, that alone won't bridge the disconnect.

The MIC must abandon their old perceptions of sustainability just as leading companies are doing. They must open the channels to hear and understand how sustainability-driven innovation can create new business value, drive competitive advantage, attract the best talent, mitigate risk, reduce short, deliver high performance in terms they understand.

As evidenced by the packed house at the UBS Accenture event, leading companies are talking. And the mainstream investor community may just be starting to listen.

Dollar bill photo via Shutterstock.