Nearly nine out of ten companies view sustainability as a value creation opportunity, expected to drive benefits including higher profitability, revenue growth and improved cost of capital, according to a new survey released by Morgan Stanley, which also found that companies are becoming increasingly adept at quantifying the ROI of sustainability investments, enabling better comparisons to other capital allocation priorities.

For the report, “Sustainable Signals: Corporates 2025,” Morgan Stanley surveyed executives at more than 330 companies with revenues greater than $100 million across North America, Europe and APAC, and representing a broad range of industries.

The survey found that companies increasingly view sustainability as an opportunity to create value, with 88% of respondents reporting seeing sustainability as a having a value creation impact on their companies’ long-term strategy, up 3 percentage points over last year, including 53% who view it primarily as value creation, and 35% as a mix of value creation and risk management.

Notably, the most significant growth by companies in seeing a value creation aspect to sustainability was in North America and Europe, increasing 9 percentage points to 89%, and 10 percentage points to 94%, respectively over the prior year’s survey.

Increased profitability topped the list of the primary ways that sustainability could drive value creation opportunities for companies over the next five years, cited by 25% of respondents, followed by higher revenue growth at 19% and lower cost of capital, as well as improved cash flow visibility at 13% each.

In addition to anticipating sustainability-related value creation opportunities, the survey also found that companies are becoming adept at measuring the anticipated returns from their initiatives, with 83% of executives now reporting that they can measure the ROI for their sustainability activities in a similar way to non-sustainability initiatives, enabling better capital allocation capabilities when comparing with other priorities.

Additionally, the survey also indicated that companies are becoming more confident in their sustainability progress, with 65% of executives describing their companies’ sustainability strategy as meeting or exceeding expectations, up from just 59% last year. The increased confidence spanned all regions, with North America reaching 65% from 61% last year, Europe at 69% vs 63%, and APAC at 60% compared with 53%.

The survey also assessed executives’ views on the most significant challenges and potential enablers of their companies sustainability strategies. “High level of investment required” once again topped the list of top barriers globally, cited by 24% of respondents’ as a top 3 choice, followed by political volatility or uncertainty at 17%. Notably, North American investors were much more likely than their global peers to select “political volatility or uncertainty” as a sustainability barrier.

Regarding enablers, the survey found that the most commonly cited factors selected by executives as the most important in delivering on their sustainability strategies were technological advancements, at 33%, followed closely by a favorable economic and operating environment at 32%, and growing customer demand at 28%.

As executives increasingly view sustainability as a value creation opportunity, the survey also found a growing awareness of risk. According to the report, 57% of executives reported that their companies have experienced climate-related events over the past 12 months that impacted operations, with APAC respondents the most likely at 73%. The most commonly cited events included extreme heat at 55% of respondents, followed by extreme weather or storms, at 53%, and wildfires or smoke, at 36%.

Specific climate-related business impacts experienced over the past 12 months included increased operational costs at 54%, disruptions to the workforce at 40%, and revenue loss due to business interruptions or supply chain failures at 39%.

Importantly, 60% anticipate negative impacts from physical climate risks in the next 5 years, according to the survey, and more than two-thirds also anticipate seeing their businesses impacted by climate transition risks as well.

Despite acknowledging climate-related risks, however, more than 80% of respondents reported that they feel that their companies are “very” (34%) or “somewhat” (54%) prepared to increase resilience against climate-related threats.

Jessica Alsford, Chief Sustainability Officer and Chair of the Institute for Sustainable Investing at Morgan Stanley, said:

“The data suggest that sustainability remains central to long-term value creation. Companies around the world report an alignment between corporate strategies and sustainability priorities as they seek to build resilient, future-ready businesses.”

Click here to access the survey.