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PwC survey: Investors say greenwashing is prevalent in corporate reporting

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Marisa Savage, ESG Leader, PwC Bermuda (Photograph supplied)

A survey of investors has revealed that nearly 80 per cent believe greenwashing is prevalent in corporate reporting.

This alarming statistic is pulled from PwC’s 2022 Global Investor Survey, which states that investors continue to prioritise climate action, despite lacking trusted information.

The report says: “While investors see inflation (67 per cent) and macroeconomic volatility (62 per cent) 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. Over the next five years, investors expect the threats stemming from climate change and cyber (including hacking and disinformation) to rise considerably.”

Some 44 per cent want climate change action to reduce greenhouse gas emissions as a top five business priority.

But just a quarter are on board with priority for protecting worker health and safety and improving workforce diversity and inclusion.

The No 1 priority identified for business is innovation (83 per cent), even higher at 86 per cent for insurance industry investors; followed by maximising profitability (69 per cent); data security and privacy ranks third (51 per cent); and effective corporate governance is fourth (49 per cent).

Arthur Wightman, PwC in the Caribbean ESG leader, PwC Bermuda, said investors want companies to focus on innovation and financial performance.

He said: “Even in a challenging economic environment, climate focus is a commercial priority for investors. Delivering net zero transformation is critical in achieving commercial imperatives and attracting capital. Today’s investors expect business to be able to change in ways that enhance profitability, build trust and deliver sustained outcomes.”

But the report says investors have a low degree of trust in corporate sustainability reporting, believing it contains unsupported claims about a company’s sustainability performance, or greenwashing.

More than three quarters (78 per cent) said “unsupported claims” were present to a moderate, large or very large extent. Only 2 per cent saw none.

And information from ESG ratings agencies is not filling the trust gap, with just 22 per cent of respondents using them to a large or very large extent.

Nadja Picard, PwC global reporting leader, PwC Germany, said: “When almost eight out of ten investors tell us they suspect greenwashing in corporate sustainability reporting, companies and regulators should take note.

“The lack of trust is troubling as sustainability information becomes increasingly important to both investors’ and other stakeholders’ decisions. There is a need for companies to improve their data, systems and governance, and for regulators to continue the move towards globally aligned and interoperable reporting and assurance standards.”

On the subject of assurance, three quarters of investors say that reasonable assurance (the level provided in financial statements) would give them confidence in corporate sustainability reporting.

Investors also have clear views about what they want from assurance practitioners: seven in ten said it is important that assurers are subject to independence and ethical standards, and 73 per cent highlighted the importance of professional scepticism.

Having knowledge of the subject matter being assured tops the list (78 per cent) of qualities investors want to see in assurance practitioners.

Marisa Savage, ESG leader, PwC Bermuda, said: “Having trust in sustainability reporting is rapidly growing in importance for investors, and independently assured information will most certainly help to build that trust being sought by the capital markets.

“To build trust effectively, assurance must be delivered by those with subject matter expertise and who are subject to professional regulation around independence and ethics.”

Respondents were concerned about near-term company exposure to climate risks and risks from geopolitical conflicts. And half see energy transition and technology change likely to have a large, or very large impact on profitability over the next decade.

They agree with significant public policy measures to tackle climate change, including imposing taxes on unsustainable activities, strong reporting requirements and targeted subsidies.

Two thirds 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 to understand the full economic effect of their business decisions; only 13 per cent disagreed.

Additionally, nearly three quarters (73 per cent) of investors want companies to report the cost to meet the sustainability commitments they have set.

PwC’s 2022 Global Investor Survey

Arthur Wightman, PwC in the Caribbean ESG leader, PwC Bermuda (Photograph supplied)

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Published December 09, 2022 at 7:52 am (Updated December 09, 2022 at 7:52 am)

PwC survey: Investors say greenwashing is prevalent in corporate reporting

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