Half of investors struggle to trust ESG reports
First published May 25, 2021, on Accountancy Daily, by Ruby Flanagan.
The online survey of nearly 5,000 individual investors across France, Germany, UK and the US, found that 70% believe that organisations have a responsibility to demonstrate their ESG performance to investors, with gen Z and younger millennial-aged investors being the most demanding.
Investors noted a demand for ESG data they can trust, with 64% noting that they currently find it challenging to judge whether a company is doing the right thing and when asked if they found it difficult to trust what companies are disclosing in their ESG reports, only 10% of respondents disagreed.
In order to trust ESG reports, it found that data is key with one third of the respondents, 31%, stating that they trust an ESG performance more when reported through numbers and data rather than qualitative descriptions and assessments, this increased to 43% for 18-34 year olds.
It also found that investors want companies to make more of an effort with their ESG reports with 66% saying that companies should make it easier to judge their efforts towards society and environment.
Companies need to be aware of this growing demand as 44% of those surveyed said that they would be more likely to invest in a company that demonstrates its ESG performance while nearly three quarters, 72%, of those surveyed wanted to know whether a company lives up to their social and moral beliefs before they invest in them.
Julie Iskow, chief operating officer of Workiva said: ‘Our survey findings represent a powerful motivation for organisations to take a serious look at how they are reporting ESG and other non-financial data. We believe there is a real competitive advantage in attracting today’s modern investors with a commitment to corporate transparency.
‘The survey indicates that investors want to see earnings growth, deeper data transparency and progress in all areas of ESG.’
The survey revealed that the transparency around ESG disclosures looks like it is becoming integral to investor decisions with the survey showing that 57% of gen Z and millennials believing that ESG will continue to become more important over the next few years, largely due to the effects of climate change.