Global professional services firm EY announced the publication of its inaugural EY 2022 CEO Outlook Survey, examining the views of over 2,000 global CEOs into the prospects, challenges and risks facing their organizations. As confidence has returned, according to the survey, the study highlights the CEO’s plans to accelerate growth and transform their businesses, with ESG emerging as one of the key focus areas for investment and M&A.

2021 was a record year for global M&A, with transactions surging to nearly $5.5 trillion, increasing more than 58% year-over-year. According to the survey, 2022 is poised to see continued M&A activity, with 59% of CEOs expecting their companies to pursue acquisitions during the year, compared to 49% at the beginning of last year. ESG is one of the top priority areas for acquisitions, with 20% of respondents reporting that their primary planned M&A activity will be to “strengthen ESG ranking/performance/sustainable footprint,” with only acquisitions to increase operational capabilities ranked ahead, at 26%.

esg playbook

In addition to being a key M&A driver, ESG considerations are increasingly playing a major role throughout the acquisition process, according to the survey. Virtually all respondents (99%) said that ESG and sustainability concerns are now being factored into their buying strategies, and 6% reported having walked from deals in the past year due to ESG-related concerns.

Report co-author Andrea Guerzoni, EY Global Vice-Chair – Strategy and Transactions, said:

“CEOs see M&A as a critical accelerant for long-term growth strategies. As ESG and sustainability concerns are becoming critically important, the market in 2022 is also expected to be fueled by M&A aimed at helping CEOs realize their sustainability strategy goals faster.”

Beyond M&A, capital allocation to ESG-focused areas appears likely to grow, as CEOs look to invest in future opportunities for their businesses. “Investing in sustainability” ranked in the top 3 responses for CEOs asked to identify the capital strategy issues in which their companies are currently placing the greatest attention and resources, behind investing in the existing business and investing in digital transformation. Overall, 82% of CEOs report that ESG factors are important or very important to strategic decision-making.

While ESG issues increasingly influence corporate decision making, however, some CEOs report some pushback from investors. According to the survey, 65% of respondents reported having encountered resistance from investors and shareholders about their sustainability transition strategy.

Guerzoni, said:

“CEOs are ready to set their organizations on a course that should deliver sustained benefits for shareholders and society. What stands out is the need for alignment between CEO thinking and that of investors, when it comes to prioritizing sustainability.”

Click here to see the EY survey results.