A recent survey shows that if a significant recession hits, CEOs in the U.S. may adjust their ESG policies to reflect the uncertain economic environment. The 2022 KPMG CEO Outlook revealed that chief executives think ESG goals are essential, but 50 percent are pausing or reconsidering sustainability efforts to prepare for a recession, and 34 percent have already done so. The survey was based on responses from 1,325 CEOs across industries and countries, and all the respondents’ firms have annual revenue of at least $500 million.
Still, CEOs in the KPMG survey said the business case for ESG remains positive, though there are several challenges to making it happen. Sixteen percent of CEOs said increasing and frequently changing ESG regulations, such as the SEC’s proposed climate disclosure rules, are one big challenge, along with a lack of budget resources to invest in ESG initiatives.
ESG initiatives aren’t the only area of sustainability threatened by a global recession. Green building standards and the decarbonization of the real estate industry, already somewhat tied in with ESG goals, may also be slower to progress during an economic downturn. Companies and real estate owners will have to respond to regulations from cities and states that may threaten fines despite rising interest rates and costs. Most likely, smaller building owners already struggling will be affected the most, as they don’t have as much capital to deploy, and borrowing costs to finance energy upgrades only get more expensive.