Investors are increasingly concerned about corporate greenwashing, with nearly all reporting that they believe corporate reporting on sustainability performance contains unsupported claims, according to a new survey by global professional services firm PwC, which also found that investors want more information on the cost of companies’ ESG commitments, and on the impact of their portfolio companies on the environment and society.
For the report, PwC’s Global Investor Survey 2023, PwC surveyed 345 investors and analysts across 30 countries and territories, with 65% of respondents at organizations with total AUM of more than $1 billion.
The survey found a broad consensus among investors on the importance of ESG and sustainability issues, with 70% agreeing that should embed ESG directly into their corporate strategy, and 75% saying that companies’ management of sustainability-related risks and opportunities is an important factor in decision-making. The report noted, however, that these levels were below those of a prior 2021 survey, despite the fact that fewer investors disagreed with these statements, with more investors instead being “neutral” on these issues.
Similarly, 69% of investors reported that they would increase their investments in companies that successfully manage sustainability issues relevant to the business’s performance and prospects, and 67% would increase investment in companies that change their business conduct to have a beneficial impact on society or the environment.
While investors appear to continue to focus on sustainability issues in their decision-making, the survey indicated increasing concerns about greenwashing risk, with 94% reporting that they believe corporate reporting on sustainability performance contains unsupported claims, up from 87% in the prior survey, and including 79% who said the unsupported sustainability claims are present to a moderate or greater extent.
The report indicated that many investors are looking to emerging regulatory sustainability reporting regimes to address their greenwashing concerns, with 57% saying companies meeting regulations and standards including CSRD, the SEC climate disclosure rule or ISSB standards would meet their information needs for decision-making to a large or very large extent, and 85% reporting that reasonable assurance would give them confidence in sustainability reporting.
Nadja Picard, Global Reporting Leader, PwC Germany, said:
“We are seeing significant steps towards more consistent reporting from companies around climate change, however there is a need for improvement.”
The survey also examined areas in which investors were seeking sustainability-related information, with 76% reporting that it is important for companies to report on the cost of meeting their sustainability commitments, and 74% looking for reporting on the roadmap to meet those commitments.
Investors have also become more interested in information on the impact of companies on the environment and society, with 75% wanting reporting on these issues, up from only 60% last year.
The report also found that investors have been active in pursuing their sustainable investment agendas, with over half saying they have turned to incentives such as incorporating progress on meeting ESG targets into executive pay, 50% reporting having submitted ESG-related shareholder resolutions, and 42% saying that they have divested their stakes in companies that haven’t demonstrated sufficient action on sustainability issues.
James Chalmers, Global Assurance Leader, PwC UK, said:
“We are moving from a period of awareness raising around the importance of climate and technological change to a time where investors are increasingly asking specific and tough questions about how companies are addressing those issues in their strategy, how they assess risk and opportunity, and what is truly material for them. In this context, corporate reporting needs to continue to evolve so it provides reliable, consistent and comparable information investors – and other stakeholders – can rely on.”