"Domestic Company CEOs Have High ESG Awareness but Are Reluctant to Invest"

[Asia Economy Reporter Park So-yeon] As ESG (Environmental, Social, and Governance) emerges as a major issue in the capital market, a survey revealed that while domestic company CEOs recognize the value and importance of ESG management, they remain passive in ESG investment and implementation.

Global accounting and consulting firm EY Hanyoung on the 26th released the results of the 'EY 2022 CEO Outlook Survey,' which surveyed over 2,000 CEOs worldwide about their investment plans for this year.

According to the report, both domestic and international companies still prioritize new growth and investment returns strategically while exploring sustainable business strategies.

Among domestic CEOs who responded to the survey, 90% stated that ESG factors are very important or important in strategic decision-making.

Additionally, half (50%) of domestic respondents answered that becoming a leader in sustainability would lead to increased sales and securing a competitive advantage. Compared to global CEOs (27%), domestic CEOs generally showed a higher level of awareness regarding ESG and sustainability.

When asked about the most important value creation drivers for corporate capital and growth by sector, 25% of respondents identified ESG as the top factor.

This was followed by cost reduction (23%), sales growth (19%), Return on Invested Capital (ROIC) (19%), and capital efficiency (14%). Globally, 24% of CEOs recognized ESG as the second most important value after sales growth (25%), indicating that ESG is expected to become a core factor in strategic decision-making worldwide in the future.

While ESG and sustainability have emerged as priority issues, domestic CEOs show strong commitment to ESG but weak investment or execution capabilities.

According to the report, only 7% of domestic respondents plan to engage in mergers and acquisitions (M&A) activities to enhance ESG performance and sustainability within the next 12 months.

Compared to global companies actively seeking ESG-related M&A (20%), domestic companies appear somewhat passive.

In particular, only 5% of domestic respondents are currently investing in sustainability.

Domestic CEOs' future investment plans ranked as follows: investment in existing businesses for organic growth and value creation (29%), digital transformation investment (16%), and investment in mergers and acquisitions (M&A), joint ventures (JV), and alliances (13%).

Moreover, globally, 13% of CEOs reported investing in sustainability, more than twice the domestic response rate.

Choi Jae-won, head of EY-Parthenon at EY Hanyoung, said, "Domestic CEOs' interest in ESG is stronger than ever, but it seems to take some time and they face difficulties in translating this interest into execution plans. However, ESG-related investments in Korea are expected to rise faster and to a higher proportion than any other type of investment."