Dive Brief:

• Nearly half of CFOs (48%) plan to increase investment in environmental, social and corporate governance (ESG) initiatives in 2023 despite high inflation, persistent supply chain bottlenecks and the risk of recession, according to a survey by software provider OneStream and Hanover Research published on Nov. 2.
• Nearly two out of five finance leaders (39%) said they will hold ESG budgets next year at the 2022 level, while only 6% plan to invest less, OneStream and Hanover Research found in a survey of 657 finance leaders.
• The proportion of CFOs gearing up to spend more on ESG dropped from the 60% who said they planned to do so in spring 2022. The decline may indicate that, with the onset of new regulation, CFOs feel pressure to rethink their ESG initiatives, OneStream and Hanover Research said.

Dive Insight:

Diversity, equity and inclusion (DEI) strategies also remain on finance leaders’ priority list, with 47% of CFOs planning to invest more in DEI initiatives next year.

Worldwide investment in sustainable mutual funds and exchange-trade funds has reached $2.47 trillion, CFO Dive recently reported, although ESG initiatives are facing a backlash from critics who decry such investments as “woke capitalism.”

The backlash — combined with the need to address inflation and other pressing macroeconomic concerns — may account for the dip in the proportion of finance leaders planning to increase their ESG spending from the 60% of finance leaders who indicated they would do so last spring.

CFOs also feel inflation and other key challenges are unlikely to dissipate before the middle of next year. Three out of four CFOs expect economic disruptions and supply chain challenges to persist at least until mid-2023, with 72% expecting that inflation won’t recede before mid-year as well, the study found.

Eighty-five percent of businesses and their financial leaders have already adjusted their strategies for a period of economic disruption. Sixty-four percent of businesses also expect to see a recession last until late 2023 as well, according to the survey.

ESG initiatives align with the Biden administration’s regulatory agenda, including a proposal by the Securities and Exchange Commission (SEC). The SEC plans to require publicly-traded companies to include disclosures on carbon emissions and climate risks.

Forty-one percent of CFOs and finance leaders said they have started to implement ESG or sustainability policies at their companies, according to the survey.

Forty-three percent of respondents said they plan to form an internal ESG or sustainability team at their businesses to define policies and oversee disclosures. Only 17% of finance leaders said they have no plans to prepare for a potential ESG rule.

At the same time, a gap remains between sustainability goals and execution — while most financial leaders agree addressing ESG issues is important, most also say their organizations lack the tools to include ESG in their decision-making, CFO Dive previously reported.