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The ESG premium: New perspectives on value and performance

In a new survey, executives and investment professionals largely agree that environmental, social, and governance programs create short- and long-term value—though perceptions of how have changed over the past decade.

Pressure on companies to pay attention to environmental, social, and governance (ESG) issues continues to mount. Researchers, business groups, and nongovernmental organizations have variously warned of the risks—or emphasized the opportunities—that such issues present to company performance. Most executives and the investment professionals who scrutinize their companies seem to agree that ESG programs affect performance. In our latest McKinsey Global Survey on valuing ESG programs, 83% of C-suite leaders and investment professionals say they expect that ESG programs will contribute more shareholder value in five years than today. They also indicate that they would be willing to pay about a 10 percent median premium to acquire a company with a positive record for ESG issues over one with a negative record. That’s true even of executives who say ESG programs have no effect on shareholder value.

What follows is a closer look at how perspectives have changed with respect to several topics, including the impact of ESG on shareholder value and financial performance, the reasons companies prioritize ESG programs, and the challenges and opportunities in ESG data and reporting.

ESG programs and shareholder value

A majority of surveyed executives and investment professionals (57 percent) agree that ESG programs create shareholder value. That share is largely consistent with responses to the survey a decade ago, as well as across most demographic categories—job title, company size, company ownership (public or private), and geography—in the present survey. Respondents in consumer-focused companies are more likely (66 percent) than those in B2B companies (56 percent) to say these programs create value.

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