EY: Resilient CEOs prioritise AI investments now and decarbonisation next

CEOs are feeling more hopeful about their immediate prospects and the actions they need to take now to create capital for investment in future growth.

But in a challenging market, there remains a focus on short-term returns. Respondents indicated that longer-term ambitions around decarbonisation and the creation of new revenue streams could be attained faster by engaging more effectively with institutional investors and government.

This is according to the latest quarterly EY CEO Outlook Pulse survey of 1,200 global executives and 300 institutional investors that provides insights on boardroom agenda priorities within a rapidly evolving global economic landscape.

Sixty percent of the CEOs surveyed say they are more optimistic about their companies’ revenue growth, with 65% feeling more positive about their business’s profitability. CEO respondents’ views of the outlook for their company and the wider business environment remain relatively unchanged compared with 12 months ago, with some signs of upside potential.

CEOs and investors diverge on sustainability focus over next 12 months

Delivering on broader societal demand to accelerate their sustainability journey is a priority for more than three-quarters (77%) surveyed, and more than half of CEOs globally (54%) see sustainability issues as a higher priority than 12 months ago. However, with a challenging economic environment, nearly one in four (23%) responded that they have deprioritised sustainability with 18% stating that this was due to financial circumstances and a further 5% looking to focus on other boardroom priorities. Investors are pulling back from environmental, social and governance (ESG) issues, with more than a third of institutional investors (35%) saying that sustainability is a lower priority for their investment portfolios than it was 12 months ago.

Technology and AI top strategic priorities

Investing in technology, including artificial intelligence (AI) to improve growth and productivity, is a top priority for nearly half (47%) of CEOs over the next 12 months. Enhancing data management and cybersecurity (45%) and managing end-to-end costs in every aspect of their business (38%) also remain as important strategic priorities for companies.

CEOs more positive about mergers and acquisitions

CEOs and institutional investors have a positive outlook for mergers and acquisitions (M&A), albeit compared to a subdued deal landscape in 2023. More CEOs are looking to pursue transaction opportunities over the next 12 months, from IPOs, divestments or spin-offs (71%) and joint ventures and strategic alliances with third parties (48%) to M&A (42%), signalling a robust appetite to pursue deals.

When asked what the top strategic drivers were for pursuing acquisitions, the survey found that acquiring technology, new production capabilities or innovative startups (40%), growing market share (33%) and accessing new geographies (32%) stood out as the top three drivers.

Commenting on the Outlook, Ronald Attard, Country Managing Partner of EY Cyprus says: “The main theme emerging from the latest issue of our EY CEO Outlook Pulse survey is the need for CEOs to balance short-term pressures with longer-term imperatives. While the adverse economic environment is forcing CEOs to focus on managing end-to-end business costs, the rapid growth of AI, combined with heightened cyber risks is driving them to prioritise investment in emerging technologies. CEOs are also looking at M&A primarily as a lever to address their near-term priorities rather than long-term growth. However, as a result of this focus on short-term financial returns sustainability appears to be moving down the business agenda, which is disappointing for those who look to companies to set the tone on this critical issue.”

To read the full report, please visit: ey.com/CEOOutlook