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Considering the business characteristics of many industrial companies, this lower prioritization of environmental initiatives is perhaps understandable. Longer product life cycles, complex manufacturing processes, demanding customer requirements and mission-critical applications make implementing sustainability programs highly complex. To date, industrial companies have had higher hurdles and fewer incentives to choose a greener path.
Yet, for firms that make the effort, the benefits can be significant. Companies with high ESG marks are securing valuation premiums, with chemicals and materials firms reflecting the greatest impact — a 116% valuation premium in the US and 229% in the EU1 — and industrial products manufacturers are seeing modest benefits as well. In addition, other institutional sources of capital and capital markets gatekeepers are increasingly factoring ESG metrics into their decision-making.
Some companies that have realized the benefit of sustainability leadership to their commercial and market performance are prioritizing further investment to stay ahead. Carrier (via ey.com US), a leader in building and cold chain solutions, recognized an opportunity to win business and improve environmental outcomes by helping customers achieve their aggressive ESG commitments with a broader array of offerings. Boosting R&D significantly, the company launched more than 80 new products and services over the course of a year to help maintain its sustainability-driven advantage.