“Investors Continue To Prioritise Climate Action”

December 8, 2022 | 0 Comments

According to PwC’s 2022 Global Investor Survey, “investors continue to prioritise climate action despite lacking trusted information.”

A spokesperson said, “While investors see inflation [67%] and macroeconomic volatility [62%] as the biggest threats facing business over the next 12 months, the survey shows that investors want management to continue to make climate change a focus. Over the next five years, investors expect the threats stemming from climate change and cyber [including hacking and disinformation] to rise considerably.

“Almost half [44%] of the investor community surveyed believe that tackling climate change by reducing greenhouse gas emissions should be a top 5 priority for business. 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 number one priority identified for business is innovation [83%] – even higher at 86% for insurance industry investors; followed by maximising profitability [69%]; Data security and privacy ranks third [51%]; and effective corporate governance is fourth [49%].”

Arthur Wightman & Marisa Savage Bermuda Dec 2022

Arthur Wightman, PwC in the Caribbean ESG Leader, PwC Bermuda, said: “Unsurprisingly, investors want companies to keep a sharp focus on innovation and financial performance. And, even in a challenging economic environment, climate focus is a commercial priority for investors. Delivering net zero transformation is critical in achieving commercial imperatives and attracting capital. Today’s investors expect business to be able to change in ways that enhance profitability, build trust and deliver sustained outcomes.”

There are trust issues

The spokesperson said, “However, investors are dealing with a difficult information environment and have a low degree of trust in corporate sustainability reporting. Investors largely believe corporate reporting contains unsupported claims about a company’s sustainability performance. Over three quarters [78%] said ‘unsupported claims’ were present to a moderate, large or very large extent; just 2% said corporate reporting does not contain unsupported claims about sustainability performance. Information from ESG ratings agencies is not filling the trust gap, with just 22% of investors surveyed saying they use them to a large or very large extent.”

Nadja Picard, PwC Global Reporting Leader, PwC Germany, said: “When almost eight out of ten investors tell us they suspect greenwashing in corporate sustainability reporting, companies and regulators should take note. The lack of trust is troubling as sustainability information becomes increasingly important to both investors’ and other stakeholders’ decisions. There is 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.”

The spokesperson said, “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.”

Marisa Savage, ESG Leader, PwC Bermuda, said: “Having trust in sustainability reporting is rapidly growing in importance for investors, and independently assured information will most certainly help to build that trust being sought by the capital markets. To build trust effectively, assurance must be delivered by those with subject matter expertise and who are subject to professional regulation around independence and ethics.”

The spokesperson said, “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.”

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