Forty-nine per cent of investors surveyed by PwC have said they would consider divesting from companies that are not taking sufficient action on environmental, social and governance (ESG) issues.

The ‘2021 Global Investor ESG Survey’ captured the views of 325 investors from around the world, primarily active asset managers and analysts with investment firms, investment banks or brokerage firms.

An additional 40 in-depth interviews were conducted globally with investors and analysts having more than a combined $11.6-trillion of assets under management.

The survey also finds that 59% of investors side with a lack of action on ESG issues making it likely they would vote against an executive pay agreement, while a third of respondents say they have already taken this action.

As such, 79% of respondents report that the way a company manages ESG risks and opportunities is an important factor in their investment decision-making.

PwC notes that, while most investors are likely to take action if companies are not doing enough to address ESG issues, most respondents to its survey also say they do not want a company’s action on ESG to significantly, if at all, impact their investment returns.

The vast majority (81%) say they would accept no more than one percentage point less in investment returns for pursuit of ESG goals; while 49% were unwilling to accept any reduction in returns.

PwC UK global assurance leader James Chalmers says PwC’s research shows investors are simultaneously focused on short-term results, as well as the longer-term societal issues that can create both risks and opportunities for their investments.

“It is clear that investors expect ESG to be an integral part of corporate strategy. That includes making expenditures to address ESG issues, while clearly communicating the rationale and benefits to the business strategy,” he says, adding that if investors do not see that commitment, they will not hesitate to take action. Such action could include divesting their position in a company and taking their clients’ money elsewhere.

ESG REPORTING

PwC also states that investors increasingly want to hear more from companies about their ESG-related commitments, with 83% of those surveyed saying it is important that ESG reporting provide detailed information about progress toward ESG goals.

Greater engagement with investors is critical, along with transparent, trustworthy reporting, says PwC.

However, the firm points out that it is of concern that only one-third of investors surveyed, on average, think that the quality of ESG reporting they are seeing is good.

As such, investors gain greater confidence in ESG reporting that has been assured, with 79% of those surveyed saying they place more trust in ESG information that has been assured, while 75% think it’s important that reported ESG-related metrics are independently assured.

Further, PwC suggests that a consistent set of metrics for measuring ESG performance would be of significant benefit to investors, with 74% of respondents saying their decision-making would be better informed if companies applied a single set of ESG reporting standards.

Meanwhile, PwC reports that climate is the leading ESG consideration for investors surveyed, with reducing Scope 1 and 2 greenhouse-gas (GHG) emissions being the most cited, by 65% of respondents, as a priority.

In addition, 82% of investors say it is important that ESG reporting explains the rationale for environmental commitments, along with detailed plans on how to reach them.

Ensuring worker health and safety (44%) and improving workforce and executive diversity, equity and inclusion (37%) are other priority ESG considerations identified.

According to the investors surveyed, ESG strategy starts at the top of a companies management. This is illustrated by 82% of respondents saying ESG needs to be embedded in the corporate strategy; and by a wide margin, 66% of respondents say they are most confident ESG issues are being addressed if someone in the C-suite is accountable.

Further, 53% of respondents think it should be the CEO.