Investors continue to prioritise climate action despite lacking trusted information
January 2023
In our new PwC Gobal Investor Survey 2022, investors say they see sustainability as a priority for companies—and one that calls for financial discipline and greater transparency. Their views point to actions that business leaders can take to guide their ESG initiatives, says Merili Vares, head of PwC Estonia's ESG field.
While investors see inflation (67%) and macroeconomic volatility (62%) as the biggest threats facing business over the next 12 months, the survey shows that investors want management to continue to make climate change a focus. The top priority identified for business was innovation (83%), followed by maximising profitability (69%). Almost half (44%) of the investor community surveyed believe that tackling climate change should be a top five priority for business.
A similar growing interest can also be noticed among Estonian investors, for example the Green Fund established by SmartCap AS last year to support the fulfillment of EU Taxonomy goals or several private equity funds that have set climate goals.
There are trust issues
However, investors are dealing with a difficult information environment and have a low degree of trust in corporate sustainability reporting. Investors largely believe corporate reporting contains unsupported claims about a company’s sustainability performance. Three quarters (78%) said ‘unsupported claims’ were present to a moderate, large or very large extent, rising to 87% including those who said they were present to a limited extent. Just 2% said corporate reporting does not contain unsupported claims about sustainability performance.
Climate focus is a commercial priority
Investors see addressing climate change as commercially advantageous. Two thirds (64%) say their focus on ESG investing is out of a desire to increase investment returns, and 68% said protecting investment returns was also a motivator. Overwhelmingly, 82% say it is a response to the demands of their clients.
This pattern reflects growing awareness of climate change as a potential material risk to business. One in five (22%) believe companies will be highly or extremely exposed to climate risk in just the next 12 months, and the number reaches 37% over a five year time horizon, matching concern about geopolitical conflict (also 37%). Over a ten year horizon, the energy transition (50%) almost ties with technology change (53%) as the trend most likely to have a large or very large impact on profitability.
Investors are supportive of significant public policy measures to tackle climate change. By a margin of 28 points, they are more likely to think that imposing taxes on unsustainable activities would be ‘effective’ rather than ‘ineffective’ in encouraging corporations to take action on sustainability issues. The margin for support of strong reporting requirements is 34 points and for targeted subsidies it is 20 points.
Investors (66%) said that companies should disclose the monetary value of the ‘effect their operations or other activities have on the environment or society’ as this would help companies understand the full economic effect of their business decisions; only 13% disagreed. Additionally, nearly three-quarters (73%) of investors want companies to report the cost to meet the sustainability commitments they have set.
About the data
In September and October 2022, PwC surveyed 227 investors and analysts across 43 territories/countries globally. Respondents were predominantly institutional investors, comprising mainly analysts (38%) and portfolio managers or Chief Investment Officers (34%), with over three-quarters having more than 10 years of experience in the industry (77%). Their investments covered a range of asset classes, investing approaches, and time horizons, with assets under management ranging from $500 million to $1 trillion or more.
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