Exclusive: Share price drops and less access to capital loom if supply chain issues persist, City insiders warn
Investment managers in the City and across the UK warn that companies without sustainable supply chains will attract less investment and see share prices fall, according to a new report shared exclusively with City PM this morning.
Nearly 85 per cent of investment managers believe that businesses who do not fix supply chain sustainability initiatives will see share prices fall as a result over the next decade, according to the research.
In fact, investors are so concerned about inaction that 84 per cent also stated that issues with supply chain sustainability and ESG standards are a risk to their investments, procurement consultancy Proxima found in its survey.
The firm assessed supply chain sustainability through the lens of the investment manager, writing in its report that there is “overwhelming evidence” that supply chain sustainability is at the top of the investor’s agenda with 97 per cent of investment managers telling the firm they consider the sustainability standards of a business’ supply chain when making investment decisions. This is reflected on both sides of the Atlantic, with US and UK-based investment managers in agreement.
Long term access to capital
Supply chain sustainability matters to investors over the long-term, as most managers indicated they firmly believe this topic will dominate the agenda during the next decade.
88 per cent of investment managers said that supply chain sustainability standards will be a key criterion for investment decisions over the next ten years.
Moreover, eight in 10 believe that businesses without supply chain sustainability and wider ESG standards will struggle to access capital in the next ten years.
In addition, seven in 10 of investment managers believe that businesses should accelerate purpose initiatives at the expense of short-term profitability.
“It is clear that investors have supply chain sustainability in their sights as we look to build a better post-pandemic world,” Simon Geale, Executive Vice President at Proxima, told City PM this morning.
“Supply chains are going to be at the heart of the change. They can be complex, and frequently are, but ultimately remain a key part of the solution along with innovation and collaboration. It’s vital that a business brings in the expertise it needs to address the challenge,” Geale added.
ESG increasingly a priority
Finally, there is rigour in how investment managers look at the supply chain sustainability of companies with nine in 10 (89 per cent) of investment managers discussing ESG standards in the supply chain with the companies they invest in. A further two-fifths (37 per cent) are having these conversations frequently.
“The concept of how a business can create value is changing, and business leaders are seeking to balance short term profit with progressing a broader range of ESG factors that will create sustained value in the mid-term,” Geale said.
“This trend is only set to continue and will dominate the coming decade; therefore, action now can create first mover advantage,” he concluded.
Proxima’s survey was conducted between 25 July and 5 August, with fieldwork being conducted by Opinion Matters. More than 1,000 investment managers in both the UK and US took part.