94 % of investors in a recent PWC survey said that corporate reporting on sustainability performance contains unsupported claims.
Sustainability continues to be pivotal for investors:
Sustainability continues to remain pivotal to investors, according to the PWC report. Investors are looking for stronger reporting standards amid greenwashing concerns.
75% said that how a company manages sustainability-related risks and opportunities is an important factor in their investment decisions, although this is down 4% from last year.
Investors this year highlighted a strong undercurrent of doubt around the reliability of sustainability reporting and information. This is often referred to as greenwashing.
• 94% believe corporate reporting on sustainability performance contains some level of unsupported claims (up from 87% in 2022)
• 15% think unsupported claims to be high to a very large extent
• 79 % said unsupported claims are present to a moderate or greater extent, which is up one percentage point from last year
• 57% said if companies meet the upcoming regulations it will meet their information needs for decision-making to a “large” or “considerable extent”
• The upcoming regulations include CSRD, the SEC proposed climate disclosure rules in the US, and ISSB standards
These perceptions of greenwashing may explain why investors are looking to regulators and standard setters to create clarity and consistency in companies’ reporting, PWC said.
Investor focus:
The focus of investors on meeting the cost of ESG commitments has also risen, the PWC researchers noted.
• 76% of investors find this information important or very important.
• 75% agree that companies should disclose the monetary value of their impact on the environment or society, up from 66% in 2022
• 85% say that reasonable assurance (akin to an audit of financial statements) would give them confidence in sustainability reporting to a “moderate”, “large”, or “considerable extent”
The survey – now in its third consecutive year – queried 345 investors and analysts across geographies, asset classes, and investment approaches. The aim was to get insights into the factors that most affect the companies they invest in and cover.
Key highlights:
• Three-quarters of investors say sustainability is important to their investment decisions
• More than half (57%) back greater clarity and consistency in sustainability reporting
• Technological transformation is driving the investment landscape
• 59% identified technological change as the most likely factor to influence how companies create value over the next three years
• 61% say faster adoption of AI is very or extremely important
• Macroeconomic and inflationary concerns fall from 2022 highs
• Concern about climate change rises from 22% to 32%, putting climate on par with cyber risks
Investors favor accelerated AI adoption, despite risks
This year’s survey findings show investors view the accelerated adoption of artificial intelligence (AI) as critical to value creation while recognizing the importance of managing risks.
• 61% say faster adoption is “very”, or “extremely important”
• 85 % noted moderately important
• 59% identified technological change as the factor most likely to influence how companies create value over the next three years
• Innovation and emerging technologies (including AI, the metaverse, and blockchain) among their top five priorities for evaluating companies
• 86% see AI presenting considerable risk from a “moderate” to “very large extent” when it comes to data security and privacy; insufficient governance and controls (84%), misinformation (83%); and bias and discrimination (72%).
Quotes:
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. All the while, investors are calling for greater engagement around how companies manage the opportunities and risks of new technologies, particularly generative AI, as new technologies increasingly drive business transformation and investment.”
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.”