97% of investors in Irish companies believe corporate reporting on sustainability performance contains unsupported claims.
Investors are hampered by a trust deficit in much of the sustainability information shared by the market, according to PwC’s latest Investor Survey.
More than nine in ten respondents (97%) who invest in or cover Irish companies are of the view that corporate reporting on sustainability performance contains unsupported claims.
“We are moving from a period of awareness raising around the importance of climate and technological change to a time where investors are increasingly asking specific and tough questions”
The survey – now in its third year – queried 345 investors and analysts across 30 countries globally – to establish the factors that most impact the companies they invest in and cover, including 38 global respondents who invested in or covered companies in Ireland.
Investors are not impressed by greenwashing
The survey paints a picture of an investment landscape driven by technological transformation. 68% of investors in Irish companies identified technological change as the single most likely factor to influence how Irish companies create value over the next three years (Global: 59%).
In particular, 58% of investors in Irish companies say that faster adoption of AI is “very” or “extremely important” (Global: 60%).
Sustainability continues to remain pivotal to investors: 82% of investors in Irish companies say that how a company manages sustainability related risks and opportunities is an important factor in their investment decisions, higher than global investors in companies around the world (74%).
62% of investors in Irish companies said that they would increase their level of investment if those companies were to address sustainability issues relevant to their business’s performance and future prospects (Global: 68%).
According to the survey, increasing financial returns and protecting the environment are equally important when it comes to what drives investor interest. Almost eight out of ten (79%) investors in Irish companies said that the potential to increase investment returns are important when it comes to drivers of investor interest (Global: 87%). At the same time, 76% said that the opportunity for the capital markets to have a positive impact on the environment or society is as important (Global: 86%).
“Investors want to know how companies are managing sustainability and emerging technologies like AI, but they lack confidence in much of the information they have about both. It’s time for companies—and their leaders—to take action,” said David McGee, leader of PwC Ireland’s ESG practice.
“We are moving from a period of awareness raising around the importance of climate and technological change to a time where investors are increasingly asking specific and tough questions. Investors want to know how companies are addressing climate and sustainability issues in their strategy, how they assess risk and opportunity and what is truly material for them. In this context, corporate reporting needs to continue to evolve so it provides reliable, consistent and comparable information to investors – and other stakeholders – can rely on.”
With 97% of investors in Irish companies believing corporate reporting on sustainability performance contains some level of unsupported claims, investors highlighted a strong undercurrent of doubt around the reliability of sustainability reporting and information that they use, often referred to as “greenwashing”.
Walk the talk on the environment
The perceptions of greenwashing may explain why investors are looking to regulators and standard setters to create clarity and consistency in companies’ reporting.
For example, 50% of investors in Irish companies said that if organisations meet the upcoming regulations and standards (including CSRD, the SEC proposed climate disclosure rules in the US, and ISSB standards), it would meet their information needs for decision-making to a “large” or “very large extent” (Global: 57%).
The focus of investors on companies’ impact on the environment is also in focus. Two-thirds (67%) of investors in Irish companies agreed that companies should disclose the monetary value of their organisation’s impact on the environment or society (Global: 75%).
The survey also highlights the willingness for investors to take action if a company is not demonstrating its commitment to addressing ESG issues. For example, 34% of investors in Irish companies would vote against the executive pay arrangements if a company is not taking sufficient action (Global: 46%); 39% would vote against director appointments (Global: 42%) and 23% would sell their investment (Global: 42%).
“We are seeing significant steps towards more consistent reporting from companies around climate change, however there is room for improvement. Investors are also demanding that companies should disclose the monetary value of their impact on the environment or society,” Mary Ruane, Leader, Asset & Wealth Management, PwC Ireland.
“All the while, investors are calling for greater engagement around how companies manage the opportunities and risks of new technologies, particularly generative AI, as new technologies increasingly drive business transformation and investment.”