Geopolitical uncertainty tops ESG concerns, report finds

In an ever-evolving corporate landscape, priorities shift. While ESG issues have been front and centre in recent years, geopolitical concerns and political uncertainties have recently dethroned them as the most pressing risks on the global CEO radar. This change in priorities, among others, forms the crux of KPMG’s 2023 CEO Outlook report.

Drawing from extensive research, KPMG’s 2023 CEO Outlook report delves into insights sourced from over 1,300 senior executives spanning a range of corporate giants.

Integrating ESG into core strategies

Despite geopolitical concerns taking the spotlight, commitment towards ESG remains robust. A significant 69% of global CEOs, with a higher concentration of 79% in the UK, have successfully integrated ESG as a value-creation mechanism within their businesses. This highlights a trend that, even amidst a year fraught with contentious debates on the meaning and relevance of ESG, these issues still form a pivotal part of long-term corporate strategies.

Nonetheless, over two-thirds, or 68% of executives, worry their advancements in ESG would not withstand stakeholder scrutiny.

While CEOs globally are firmly invested in ESG, the anticipated returns on these investments are perceived to be a few years out. The prevalent belief among those surveyed is that ESG will profoundly influence customer relationships, brand reputation, and M&A strategy over the next three years.

A shifting risk landscape

Compared to previous years, CEOs’ confidence in the global economic landscape over the coming three years remains relatively unchanged at 73%, a marginal increase from 71% the previous year. However, the perception of risk has witnessed a transformation. Geopolitical uncertainties have now come to the fore, overtaking other concerns.

An interesting trend emerging from the report is that approximately 35% of the surveyed executives have recalibrated their ESG terminology. This suggests a shift towards a more detailed and specific discourse, aiming to channel efforts where they promise maximum impact.

Greenwashing: A growing concern

Further complicating the ESG landscape is the surge in greenwashing instances, as a recent RepRisk report highlights. Alarmingly, 25% of ESG issues tied to climate are now associated with greenwashing, a rise from 20% in the prior year.

Closing thoughts for asset managers

While the horizon of corporate risks and priorities is ever-shifting, one thing remains clear: ESG remains a cornerstone of long-term corporate planning despite being momentarily eclipsed by geopolitical concerns. For asset managers, this emphasises the need for a multi-faceted approach that not only appreciates the immediate concerns of geopolitical uncertainties but also recognises the enduring significance of ESG in shaping the future corporate world.

 

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