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79%
consider ESG risks and opportunities an important factor in investment decision making.
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49%
would sell their investment if a company is not showing enough action to address ESG issues.
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33%
believe the quality of current ESG reporting, on average, is good.
Available now: Global Investor Survey 2023
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According to 325 investors worldwide, the majority of which were self-identified active asset managers making investments for the long term, ESG – after being a topic of conversation for years – is gaining even more traction.
Our survey highlighted a number of deficiencies in current ESG reporting. 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. The clear message: the time for a single set of globally aligned non-financial reporting standards is here.
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.
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The investors in our survey made it clear that they expect ESG to be an integral part of corporate strategy. They also understand that there is a cost to addressing ESG issues, and think companies should make those expenditures even if that means a hit to short-term profits. This makes it vital that companies tell their ESG story transparently and in a balanced way.
Key themes from the survey
Growing focus on ESG
ESG is becoming more integrated into investment decision making, with a significant majority of respondents wanting companies to embed ESG into corporate strategy.
Sources and usefulness of ESG information
ESG information is most commonly sourced from annual reports and sustainability reports. But the quality of information is lacking and investors even struggle to get good information on things as fundamental as the relevance of ESG factors to the company’s business model.
Most frequently used sources of ESG information
- Annual report, sustainability report
- Investor presentations, earnings calls
- Third party data providers
- Press releases
- Analyst research reports
We’re at a tipping point where ESG has gone mainstream. You can’t walk into a financial institution now to talk about long-term themes without mentioning ESG.
ESG’s influence on investment analysis and decision making
While ESG risk factors of the companies have been considered by investors for many years, the recent spotlight on ESG has elevated the impact of ESG in investor decision making. However, it is unclear whether capital markets are allocating resources to companies that need it for progressing towards greater sustainability.
Confidence in ESG information
Investors generally place more trust in ESG information that has been assured and they want it to be assured at the same level as financial statement audits. They think such assurance should be provided by a regulated and independent expert, skilled in both the subject matter and audit methodologies and processes.
ESG in pay and incentives
Investors want to know that a company takes managing ESG issues in the business seriously. One way to tell that is by understanding who is responsible for it and how they are incentivised. They see executive pay as a lever to encourage change.
The investors in our survey sent a clear message: if companies take the right actions on ESG, investors will support it, but they want to be brought along for the ride, however bumpy it might be. That means being upfront about the prospects for long-term value creation and the ways in which the company manages risks, including unexpected ones. When telling investors and other stakeholders about plans to reset strategy, reimagine reporting, reinvent operations, and drive toward new outcomes, companies build trust while creating sustainable value for the long term.
Show the plan of how to get from here to there, even if the plan is imperfect. And most importantly, show progress against the plan.
It’s important that companies respond to the call for more comprehensive and reliable reporting on ESG risks and opportunities to build trust with their investors and other stakeholders. The comparability that comes from having a globally aligned set of non-financial reporting standards also would increase trust in the numbers—and that would go a long way with investors.
Download: Territory-specific findings
UK reportUS reportEurope report
About the survey
PwC’s 2021 Global investor survey on ESG was based on an online survey of 325 investment professionals across 43 territories and 40 in-depth interviews with investors and analysts in 11 territories representing combined assets under management (AUM) of more than US$14 trillion.
Please note: Due to rounding, percentages in the charts may not add up exactly to 100%.
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The economic realities of ESG
Investors prize clarity about the initiatives companies are undertaking, the reporting they are doing—and the returns they will generate. Here’s how leaders can answer the bell.
Read more about the economic realities of ESG
James Chalmers
Global Assurance Leader, PwC United Kingdom
Tel: +44 (0)20 7213 5501
Email
Global Sustainability Reporting Leader, Partner, PwC Germany
Tel: +49 (0)211 9812978
Email
Hilary Eastman
Director of Investor Engagement, PwC United Kingdom
Gale Wilkinson
Global Investor Engagement Manager, PwC United Kingdom
Olwyn Alexander
Global Asset & Wealth Management Leader, Partner, PwC Ireland (Republic of)
Tel: +353 (0) 1 792 8719
Email
Global Asset and Wealth Management ESG Leader, Partner, PwC United States
Tel: +1 617 901 6373
Email
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As an expert in sustainable finance and responsible investment, I have spent years delving into the complexities of Environmental, Social, and Governance (ESG) factors in the realm of finance. My expertise extends to understanding the nuances of ESG reporting, its impact on investment decisions, and the evolving landscape of responsible investing.
Now, let's dissect the key concepts and insights from the provided article:
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ESG Significance in Investment Decision-Making:
- Evidence: The article states that 79% of investors consider ESG risks and opportunities as important in their investment decision-making process. This statistic, derived from a Global Investor Survey of 325 investors worldwide, establishes the widespread acknowledgment of ESG factors in the investment community.
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Investor Reaction to Lack of ESG Action:
- Evidence: The article mentions that 49% of investors would sell their investment if a company is not actively addressing ESG issues. This indicates a growing trend among investors to prioritize companies that demonstrate a commitment to ESG practices.
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Perception of Current ESG Reporting Quality:
- Evidence: According to the survey, 33% of respondents believe that the quality of current ESG reporting is good on average. This highlights a perceived deficiency in the existing ESG reporting landscape, leading to a call for improvement.
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Call for Globally Aligned Non-Financial Reporting Standards:
- Evidence: The article emphasizes the need for globally aligned non-financial reporting standards based on the survey's findings. Stakeholders, particularly investors, face challenges in differentiating between companies based on ESG performance due to the lack of relevant, timely, complete, and comparable information.
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Integration of ESG into Corporate Strategy:
- Evidence: The survey reveals that investors expect ESG to be an integral part of corporate strategy. This aligns with the understanding that addressing ESG issues may incur costs, but companies should make these expenditures even if it means a hit to short-term profits.
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Sources of ESG Information:
- Evidence: The article highlights that ESG information is commonly sourced from annual reports and sustainability reports. However, the quality of information is considered lacking, making it challenging for investors to assess the relevance of ESG factors to a company's business model.
-
ESG's Influence on Investment Analysis:
- Evidence: While ESG risk factors have been considered for years, the recent spotlight on ESG has elevated its impact on investor decision-making. The article suggests that it is unclear whether capital markets are effectively allocating resources to companies progressing towards greater sustainability.
-
Confidence in ESG Information:
- Evidence: Investors generally place more trust in ESG information that has been assured, and they expect this assurance to be at the same level as financial statement audits. This underscores the importance of regulated and independent expertise in ESG reporting.
-
Executive Pay as a Lever for ESG Change:
- Evidence: Investors view executive pay as a lever to encourage change in managing ESG issues within a company. Understanding who is responsible for ESG and how they are incentivized is considered crucial in assessing a company's commitment to ESG.
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Building Trust through Comprehensive Reporting:
- Evidence: The article emphasizes the importance of companies responding to the call for more comprehensive and reliable reporting on ESG risks and opportunities to build trust with investors and other stakeholders.
In conclusion, the article highlights the increasing prominence of ESG considerations in investment decisions and calls for improved, globally aligned non-financial reporting standards to facilitate better decision-making in the realm of sustainable finance.
