Investors are increasingly calling for clarity about the ESG initiatives companies are undertaking and demanding more holistic, comparable and reliable decision-useful ESG reporting. New PwC research shows that if companies aren’t doing enough, or transparently reporting their progress, investors will take action: they will engage and vote, and divest if needed.
For investors, what started out as a way to measure the environmental, social, and governance performance of a company for the purposes of gauging risk is now a major force driving investment strategy.
Expectations
Investors expect ESG to be a core part of a company’s strategy and reducing Scope 1 and Scope 2 emissions1 was the most cited issue investors think companies should prioritise.
[1] Scope 1 emissions (direct emissions from a company’s operations) and Scope 2 emissions (indirect emissions from purchased or acquired electricity, steam, heat, and cooling).
[2] For companies in the main industry the respondent covers.
The reality
Our survey suggests that investors are torn between what they view as a responsibility to the planet and society and their fiduciary responsibilities to their clients.
Most of the investors we surveyed said they thought it was worth sacrificing short-term profitability to address ESG issues. These findings should give some comfort to companies who may worry that investors will be critical of reductions in EPS (earnings per share).
Information needs
Our survey highlighted a number of deficiencies in current ESG reporting: only one-third of investors, on average, think the quality of the reporting they’re seeing today is good enough. Simply put, much of today’s ESG reporting lacks relevant, timely, complete and comparable information – such that stakeholders cannot easily differentiate between companies on ESG-related performance – making capital allocation decisions difficult for all in the ecosystem.
Actions
Investors said they want to engage with companies on their ESG journey, but in the absence of real action and transparent communication through reporting, they will take action too – using their power to vote and, if necessary, selling their investment and walking away.
About our survey
In September 2021, PwC conducted an online survey in which we received responses from 325 investment professionals from 43 territories. We also conducted 40 in-depth interviews in 11 territories during September and October 2021. The respondents to the online survey were spread across a range of industries, roles and specialisms. The online research was undertaken by PwC Research, our global centre of excellence for primary research and evidence-based consulting services. The in-depth interviews were conducted by partners and staff of PwC.
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