A ‘worrying level of apathy’ towards ESG investments has developed in the international investment community, according to the latest EY Investors Institutional Investor survey.
The annual report canvasses the views of 350 key decision makers at firms globally, gauging the extent to which they are building sustainability into their investment processes.
Among other notable trends, the findings suggest there is a gap between the statements investors are making on the importance of ESG factors and the actions they are taking.
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Some 88% of respondents said their firms have made more use of ESG data over the last year.
However, 92% believe it is not worth sacrificing short-term performance for the longer-term potential benefits of ESG investments, and 66% said that ESG considerations are likely to play less of a role in their investment choices over the coming years.
“The global investor community should be front and center of the drive for sustainability, but instead what we’re witnessing is worrying levels of apathy,” said Dr Matthew Bell, EY Global climate change and sustainability services leader.
“Many investors do make the right noises on climate change but there’s a real failure to walk the talk.
“In some ways, it’s understandable that investors are being passive – they are rightly worried about the many holes in company reporting, but what’s less forgivable is the apparent search for instant gratification when it comes to profitability.
“There’s a pervasive view that immediate gains matter more than the valuable slow-burn rewards from ESG investments; and despite the latest UN assessment highlighting the lack of action on climate change, and that global warming could pass three degrees Celsius by 2100, with devastating impacts, investors seem to be focused on shorter term economic cycles and geo-politics.”
Dissatisfaction with non-financial reporting
Just 55% of investors surveyed said that climate change would have any impact at all on their strategies, with focus instead placed on changes to the business cycle and possible trade restrictions.
Meanwhile, 93% claimed they are confident that companies will still meet their targets for sustainability and decarbonisation, while 62% say they are well equipped to assess companies’ climate change reports.
However, just 17% of those surveyed say they monitor changes in companies’ climate policies.
The report also suggested that investors are dissatisfied with the efforts companies are making to deliver non-financial reporting, with 80% suggesting reports need to highlight truly material statements more clearly.
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Some 64% say there is a need for independent auditing of sustainability disclosures.
“If the world is to stand any chance of hitting net-zero goals, we’ll need trillions of dollars of funding and that all hinges on having an investor community that takes sustainability seriously, treats it as a source of value rather than purely as a risk, and backs up words with actions,” EY’s Bell says.
“Done right, we could see an uptick in capital flowing into vital climate change projects, providing a much needed shot in the arm for climate finance and untold ripple effects in the battle against climate change.”
This story was written by our sister title, Portfolio Adviser
