When it comes to corporate sustainability reporting, there’s a lack of investor trust issue, said PwC recently when releasing results of its 2022 Global Investor Survey.
In September and October 2022, the survey collected responses from 227 investors and analysts across 43 territories/countries globally, according to the firm.
While investors see inflation (67%) and macroeconomic volatility (62%) as the biggest threats facing business over the next 12 months, 44% of the investor community surveyed believe that tackling climate change should be a top five priority for business, PwC noted.
This contrasts with lower scores for societal ESG issues such as protecting worker health and safety (27%) and improving workforce diversity and inclusion (25%), the firm added.
The top priority identified for business was innovation (83%), followed by maximising profitability (69%), according to PwC.
However, the lack of investor trust is clearly an issue when 78% of respondents said “unsupported claims” were present to a moderate, large or very large extent, rising to 87% including those who said they were present to a limited extent, according to survey results.
In addition, only 2% said corporate reporting does not contain unsupported claims about sustainability performance.
Information from ESG ratings agencies doesn’t help solve the lack of investor trust issue, with just 22% of investors surveyed saying they use them to a large or very large extent, PwC pointed out.
Survey highlights
- Investors see addressing climate change as commercially advantageous.
- Two thirds (64%) say their focus on ESG investing is out of a desire to increase investment returns, and 68% said protecting investment returns was also a motivator.
- 82% say ESG investing is a response to the demands of their clients.
- This pattern reflects growing awareness of climate change as a potential material risk to business.
- One in five (22%) believe companies will be highly or extremely exposed to climate risk in just the next 12 months, and the number reaches 37% over a five year time horizon, matching concern about geopolitical conflict (also 37%).
- Over a ten year horizon, the energy transition (50%) almost ties with technology change (53%) as the trend most likely to have a large or very large impact on profitability.
- Investors are supportive of significant public policy measures to tackle climate change.
- By a margin of 28 points, they are more likely to think that imposing taxes on unsustainable activities would be ‘effective’ rather than ‘ineffective’ in encouraging corporations to take action on sustainability issues.
- The margin for support of strong reporting requirements is 34 points and for targeted subsidies it is 20 points.
- 66% of investors said that companies should disclose the monetary value of the ‘effect their operations or other activities have on the environment or society’ as this would help companies understand the full economic effect of their business decisions; only 13% disagreed.
- Additionally, nearly three-quarters (73%) of investors want companies to report the cost to meet the sustainability commitments they have set.
- On the subject of assurance, three-quarters (75%) of investors say that reasonable assurance (the level provided in financial statements) would give them confidence in corporate sustainability reporting.
- Investors also have clear views about what they want from assurance practitioners: seven in ten (72%) said it is important that assurers are subject to independence and ethical standards, and 73% highlighted the importance of professional scepticism.
- Having knowledge of the subject matter being assured, tops the list (78%) of qualities investors want to see in assurance practitioners.
When almost eight out of ten investors tell us they suspect greenwashing in corporate sustainability reporting, companies and regulators should take note, said Nadja Picard, PwC Global Reporting Leader, PwC Germany.
“The lack of investor trust is troubling as sustainability information becomes increasingly important to both investors’ and other stakeholders’ decisions,” Picard noted. “There’s a need for companies to improve their data, systems and governance, and for regulators to continue the move towards globally aligned and interoperable reporting and assurance standards.”
