Investors Dissatisfied with Corporate Sustainability Reporting

Investors are significantly dissatisfied with the current level of corporate transparency and reporting of sustainability information, according to new research in the US.

The PwC Sustainability Investor Survey revealed that investors were not getting the information they were looking for, with 82 per cent of investors dissatisfied with the financial quantification of risks and opportunities, the comparability of information (79 per cent) and information on the relevance and implications of sustainability risks (74 per cent).

The research by global professional services firm, PwC considered the views of US institutional investors representing assets under management of over $7.6 trillion, including asset managers (45 per cent), pension funds (33 per cent), mutual funds (7 per cent), hedge funds (5 per cent) and a variety of other organisations (10 per cent).

“The purpose of this survey was to gain a deeper understanding of whether sustainability issues are affecting the decisions being made by investors,” Kayla Gillan, Leader of PwC’s Investor Resource Institute said.

“Our research sought to gain insight from investors about how they are incorporating issues of climate change, resource scarcity, extreme weather events and evolving corporate responsibility expectations into their investment decisions and strategies. We found significant evidence that an effect is occurring today—and that it is likely to increase in coming years.”

Risk emerged as a key factor for investors, with almost three-quarters of responding investors considering sustainability issues primarily because they believe doing so will reduce risk.

Enhancing investment returns (52 per cent) and generally avoiding firms with unethical conduct (55 per cent)  were the other other significant motivations for considering sustainability in investments.   

Around four fifths of investors said they considered sustainability in one or more investment contexts in the past year, while about 85 per cent expected to consider them three years from now.

Two-thirds of investors said that if common standards were used, they would be more likely to assess the materiality of environmental or social factors when making investment decisions.

Climate change proved more significant than social responsibility. In the past 12 months, 82 percent of respondents had considered climate change or resource scarcity in future investment decisions, compared to 79 percent of investors considering social responsibility.

The research indicated that investors preferred direct engagement with companies around sustainability considerations.

Most considering sustainability in investment decisions said they were likely to have some form of direct communication with their portfolio companies on these issues in the next 12 months, and nearly 90 per cent indicated that they would “very likely” request information from the company. More than two-thirds of these investors are “very likely” to seek a meeting with the companies’ boards or management.