Environmental, social, and governance (ESG) are increasingly important for businesses to measure their impact within their value and supply chains. To address ESG requirements effectively, many businesses are actively identifying and managing ESG issues, ensuring they align with evolving expectations. Embedding strong ESG values into your organisation greatly affects how your business is viewed by investors and broader stakeholder groups like suppliers, customers, and the community.
With the environmental crises we face, progress in ESG and corporate sustainability is more crucial than ever before. Not just that, but PwC has found it is now a make-or-break consideration for leading worldwide investors. Continuing reading as we dive into the consequences of not integrating ESG factors into your business.
Businesses that fail to act responsibly could risk losing sustainable finance
One of the most crucial ESG issues to be aware of is that businesses that fail to act responsibly or integrate ESG into their strategies could risk losing investors. The PwC 2021 Global Investor ESG Survey shares the views of 325 investors. These investors include active asset managers and analysts with investment banks, brokerage firms, and investment firms.
Another 40 in-depth global interviews were carried out with analytics and investors who have over 10 trillion euros in assets under management. Amongst the investors surveyed, the climate was the leading ESG consideration, with a reduction in Scope 1 and 2 greenhouse gas emissions highlighted as the most pressing problem. The research found the majority of investors are likely to take action if businesses do not do enough to address ESG issues.
However, the majority say they do not want an enterprise’s action on ESG to impact their investment returns significantly, if at all, highlighting the risks to ESG investing. The survey only further confirmed that investors are looking for ways to balance their key commitment to customers with their responsibility to the planet and humanity. What this means is that ESG criteria often remain in the background when picking the kind of investments. However, ESG investments are still expected to be more attractive because they generate similar returns but with lower ESG risks.
What do investors want from companies regarding their ESG commitments?
The research found investors providing sustainable finance want to hear more from businesses concerning their ESG commitments. Approximately 83 percent of those investors surveyed said ESG reporting should offer detailed information on progress towards ESG ambitions. Transparent and trustworthy reporting and enhanced engagement with investors are essential.
One thing the survey noted was that it is surprising and even, a tad worrying that just one-third of investors surveyed feel the quality of ESG reporting they are currently seeing is good. Investors gain more confidence in ESG reporting than has been assured. This can be guaranteed through transparent and detailed ESG reporting. Most of the participants in the survey agreed they place a lot more trust in ESG information that has been assured.
Therefore, the survey suggests a consistent set of measurements to track ESG performance would be of immense benefit to investors. An incredible 74 percent of the survey participants said their decision-making would be better informed if businesses applied a single set of ESG reporting standards. Most investors agreed with the importance of being able to compare ESG performance across companies too.
Summary
The recent PwC report highlights some things businesses focusing on ESG factors should be aware of, particularly regarding ESG issues. In particular, that not having an ESG strategy can be a make-or-break amongst investors and that the quality of current ESG reporting could be improved to enhance decision-making.
