Companies' abilities to act on ESG issues have now become a make-or-break consideration for leading investors globally, said PwC recently.
Almost half of the 325 investors (49%) from around the world surveyed by PwC express willingness to divest from companies that aren’t taking sufficient action on ESG issues, the firm noted.
- More than half, 59%, also indicated that the lack of action on ESG issues makes it likely they would vote against an executive pay agreement, while fully a third said they have already taken this action.
- A large majority, 79%, say the way a company manages ESG risks and opportunities is an important factor in their investment decision making, PwC added.
- While most investors are likely to take action if companies are not doing enough to address ESG issues, most also say that they don’t want a company’s action on ESG to significantly, if at all, impact their investment returns.
- The vast majority, 81%, said they would accept no more than one percentage point less in investment returns for pursuit of ESG goals; nearly half, (49%), were unwilling to accept any reduction in returns.
Investors want more robust and trusted ESG reporting
Investors increasingly want to hear more from companies about their ESG-related commitments — 83% surveyed said it is important that ESG reporting provide detailed information about progress toward ESG goals.
But only one-third of investors surveyed, on average, think that the quality of ESG reporting they are seeing is good, survey results indicate.
Investors gain greater confidence in ESG reporting that has been assured – 79% of those surveyed said they place more trust in ESG information that has been assured, and 75% think it’s important that reported ESG-related metrics are independently assured, PwC noted.
A consistent set of metrics for measuring ESG performance needed
A consistent set of metrics for measuring ESG performance would be of significant benefit to investors, PwC pointed out.
Nearly three-quarters (74%) said their decision-making would be better informed if companies applied a single set of ESG reporting standards, and a similar number (73%) say it’s important to be able to compare ESG performance across companies, survey results indicate.
Leading ESG considerations
- Climate is the leading ESG consideration for investors surveyed, with reducing Scope 1 and 2 greenhouse gas (GHG) emissions being the most cited (by 65%) ESG issue for companies to prioritise.
- 82% of investors said it is important that ESG reporting explains the rationale for environmental commitments, along with detailed plans on how to reach them.
- Ensuring worker health and safety (44%) and improving workforce and executive diversity, equity and inclusion (37%) are other priority ESG considerations identified.
- According to the investors surveyed, ESG strategy starts at the top. A high percentage of investors (82%) said ESG needs to be embedded in the corporate strategy, and by a wide margin (66%) respondents said they are most confident ESG issues are being addressed if someone in the C-suite is accountable. More than half of those respondents (53%) think it should be the CEO.