[Ed. note: Today’s’ blogs are the final ones for 2024. We will return January 2. Have a Happy and safe Holiday.]
Investors remain a top priority for corporate ESG/sustainability efforts and disclosures, but is it really worthwhile? I’ve long advocated that companies are better served by focusing attention internally rather than externally – if individual corporate performance improves, investor confidence/support will follow. If you prioritize investors in your efforts, take a look at results from the latest EY Institutional Investor Survey, which shows “a pronounced gap between what investors say and do when considering sustainability” and that “there is little sign that investors intend to prioritize ESG investments more strongly in their capital allocation strategies in the immediate future.”
- While 88% of investors surveyed have increased their use of ESG information, 92% worry that ESG-related initiatives harm short-term corporate performance.
- Despite the rise of sustainability reporting, 66% of investors say their institution is likely to decrease its consideration of ESG in decision-making.
- Some 85% of investors say that greenwashing is a worsening problem — yet 93% seem confident that companies will meet their sustainability targets.
Survey participants indicated they
“understand that long-term value is generated by companies transitioning to more sustainable business models. Nevertheless, immediate macroeconomic and geopolitical pressures mean that their investment decision-making is still often geared toward short-term objectives… Nearly two-thirds (63%) of investors surveyed say that shifts in the business cycle — including periods of slower economic growth and recession — is the factor that will most acutely or substantially affect their institution’s investment strategy over the next two years.”
For those shaking their heads and pointing to climate risk, there is this – “it is not always clear that investors rank climate change as close to economic concerns on their priority lists. Many investors are still strongly motivated by the desire to deliver short-term returns to their clients.” Let’s be honest here – this isn’t (or shouldn’t be) really news. EY acknowledged “the say-do gap and investors’ focus on short-term performance was already evident in the 2022 EY Global Corporate Reporting and Institutional Investor Survey.”
The results support the notion that companies should indeed turn their attention to internal opportunities and actions. Not only does that accrue to the company’s financials, it builds credibility and fights greenwashing, leading to improved investor confidence:
“… another factor that may be contributing to the say-do gap is that investors don’t necessarily trust the information being provided to them by companies. Therefore, they are cautious about allocating capital to businesses claiming sustainability credentials. More than four out of five investors surveyed for the research (85%) say that greenwashing and similarly misleading statements about companies’ sustainability performance is a greater problem compared with five years ago.”
Members can learn more about investor trends in ESG/sustainability here.
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