More than nine in 10 investors (94 per cent) believe corporate reporting on sustainability performance contains unsupported claims, according to PwC’s 2023 Global Investor Survey, launched today.
The survey – now in its third consecutive year – queried 345 investors and analysts across geographies, assets classes, and investment approaches for insights into the factors that most affect the companies they invest in and cover.
The survey finds that while macroeconomic and inflationary concerns are still top-of mind, they have eased from 2022’s highs. Notably this year, climate risks have risen considerably, putting it on par with cyber risk – at 32 per cent.
All the while, the survey paints a picture of an investment landscape driven by technological transformation: 59 per cent identified technological change as the most likely factor to influence how companies create value over the next three years. In particular, 61 per cent say faster adoption of AI is “very” or “extremely important”.
Sustainability also continues to remain pivotal to investors: 75 per cent say that how a company manages sustainability related risks and opportunities is an important factor in their investment decisions, although this is down 4 per cent on last year.
James Chalmers, Global Assurance Leader, PwC UK says:“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.”
Investors look to stronger reporting standards amid greenwashing concerns
Investors this year highlighted a strong undercurrent of doubt around the reliability of sustainability reporting and information that they use, often referred to as “greenwashing”. 94 per cent of investors believe corporate reporting on sustainability performance contains some level of unsupported claims (up from 87 per cent in 2022), including 15 per cent who think they are there to a “very large extent”. The proportion who said unsupported claims are present to a moderate or greater extent is up one percentage point on last year at 79 per cent.
These perceptions of greenwashing may explain why investors are looking to regulators and standard setters to create clarity and consistency in companies’ reporting. 57 per cent of investors said that if companies meet the upcoming regulations and standards (including CSRD, the SEC proposed climate disclosure rules in the US, and ISSB standards), it will meet their information needs for decision-making to a “large” or “very large extent”. Furthermore, 85 per cent say that reasonable assurance (akin to audit of financial statements) would give them confidence in sustainability reporting to a “moderate”, “large”, or “very large extent”.
The focus of investors on meeting the cost of ESG commitments has also risen, with 76 per cent finding this information important or very important. Investors also want information on a company’s impact on society or the environment, and of those, 75 per cent agree that companies should disclose the monetary value of their impact on the environment or society, up from 66 per cent in 2022.
Investors favour 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 recognising the importance of managing risks. 61 per cent of investors say faster adoption is “very”, or “extremely important”. Including responses noting “moderately important”, this jumps to 85 per cent. Investors identified technological change (59 per cent) as the factor most likely to influence how companies create value over the next three years. Furthermore, investors ranked innovation and emerging technologies (including AI, the metaverse, and blockchain) among their top five priorities when evaluating companies. Nonetheless, 86 per cent 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 per cent), misinformation (83 per cent); and bias and discrimination (72 per cent).
Nadja Picard, Global Reporting Leader, PwC Germany concludes: “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.”