Chief financial officers are known for picking their words carefully and sticking to a script, particularly on earnings calls. And apparently, that script has a new key element: what the firm is doing to be a good citizen.

A new study reports more than three times as many CFOs of S&P 500 companies discussed so-called ESG—environmental, social, and governance—matters during fourth-quarter earnings calls in 2020 than they did three years ago. That’s only 20 CFOs in total, but experts say it could signal a tipping point in the movement, which often pits good citizenship against hard-to-promise or hard-to-measure financial considerations. “ESG is now in the lap of CFOs because it is directly tied to how money is made and the financial health of the company,” says Gloria Mirrione, a sector leader for Korn Ferry’s Asset Management practice and coleader of the firm’s Impact Investing practice.

Experts say one reason for the increased attention on ESG initiatives is that investors big and small are pushing for more transparency and disclosure around them. But if CFOs aren’t careful about communicating targets and how they are measured, it could negatively impact the company’s stock price, says Jeff Constable, a Korn Ferry senior client partner and coleader of the firm’s Global Financial Officers practice. He says it’s the classic financial dilemma of not wanting to overpromise and underdeliver. “There’s always a risk in pushing investor-driven metrics too far,” he says.

While CFOs may want to move cautiously and methodically, they understand that they still have to move. ESG initiatives are becoming critical for many organizations to attract new investors; total assets in sustainable funds grew to $1.7 trillion in 2020, a 50% increase from the beginning of the year. Globally, more than $40 billion were held in funds that measure or use ESG ratings to make investment decisions.

CFOs also say investing in ESG initiatives can reduce raw material costs and decrease operating expenses. Moreover, banks and governments are offering lower interest rates on loans linked to sustainability measures.

To be sure, calculating the financial impact of ESG measures is a complicated calibration. Where CFOs used to have a pretty straightforward job: keep costs down and profitability up. Now they have to factor in the impact of costs to reduce the company’s carbon emissions or similar initiatives investors are demanding. Among the related questions: Will investors be willing to accept a lower return to achieve carbon-neutral status sooner?

Barry Bregman, a senior client partner in Korn Ferry’s Global Financial Officers practice, says CFOs and investors will engage in an ongoing dialogue about what they are willing to accept to balance good performance with good behavior. “Organizations and investors appear willing to make some trade-offs on returns versus doing the right thing because, at the end of the day, both think it will pay off over the long run,” he says.

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