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Survey: 74-76% of investors want firms to report costs, road map to achieve their sustainability commitments
PwC’s Global Investor Survey 2023 showed that 76 percent of investors want companies to report the cost to meet the sustainability commitments the company has set (e.g., capital operating expenditures needed to reach net-zero or social targets), while 74 percent of investors wanted companies to report the road map to meet the sustainability commitments the company has set.
Sustainability is clearly on the minds of investors, and they are pressing to understand how companies incorporate sustainability considerations into strategic decision-making, risk management, and their financial statements. Investors want to know how a company’s sustainability plans square with its business model and, ultimately, its prospects for creating long-term value.
The survey responses reflect these broader concerns. For example, investors largely agree that ESG should be directly embedded into company strategy, and that companies should make expenditures that address ESG issues relevant to their business—even in cases where doing so would reduce short-term profitability. How a company manages its sustainability-related risks and opportunities is vital to investor decision-making. ‘We want to understand what those [sustainability] commitments actually mean for how [a company is] deploying capital or positioning the business,’ said one investor.
Notably, however, the strength of positive investor views about the integration of ESG appears to have diminished since the PwC survey in 2021, particularly—as the chart below shows—among those who agree and strongly agree about ESG’s importance to strategy and investment decision-making.
As for AI adoption, recent developments in AI and other emerging technologies have excited companies with the possibility of everything from improved productivity to new sources of top line growth and new business models. Investors are interested in this, too, ranking technological change (59%) as the factor most likely to influence how companies create and capture value in the coming three years. Further, investors ranked innovation and emerging technologies (including AI, the metaverse and blockchain) among their top five priorities when evaluating companies.
AI is of paramount interest. Accelerated adoption of AI is seen as critical to the value equation, with 61% of investors saying faster adoption is very or extremely important. When responses indicating ‘moderately important’ are included, the proportion jumps to 85%.
Nonetheless, investors are no stranger to the challenges, noting that AI could spur data security and privacy threats, misinformation, and risks related to insufficient governance processes and controls.
Beyond their interest in reporting on how sustainability affects financial performance (outside-in reporting), 75% of investors wanted to know about the impact a company has on the environment or society (inside-out reporting). That’s a big increase from 60% in 2022. Among those investors who said this latter form of impact matters, 75% agree that companies should disclose the monetary value of their impact on the environment or society—up from 66% in 2022. And 81% of investors said that knowing the monetary value of the company’s environmental and societal impact would help companies better integrate potential trade-offs between environmental and social issues in their decision-making. That said, evaluating monetary impact is complex, and will require more management attention.
Still, there’s an upside for companies that get it right. Among respondents, 69% of investors said they would increase their level of investment in companies that successfully manage sustainability issues relevant to the business’s performance and prospects. Nearly as many (67%) said they would increase their investment in companies that change their business conduct to have a beneficial impact on society or the environment. All of this is in line with what investors are hearing from their clients: nine in ten investors said that client demand was a moderate, large or very large factor driving investor interest in ESG and sustainability investing.
Sustainability and AI are key areas where investors are pushing for progress—and for higher quality information. Better reporting is a necessary first step, but ultimately the information must serve a strategic purpose, too. For CEOs and their leadership teams, the key is to use these insights to spot opportunities and threats, take their business models to the next level, and sharpen their competitive edge, sustainably.
These are among the findings of PwC’s Global Investor Survey 2023. The survey, now in its third consecutive year, queried 345 investors and analysts across geographies, assets classes, and investment approaches for insights into the factors that most affect the companies they invest in and cover. Through the survey, and follow-up interviews with investment professionals, we explored how investors assess threats and opportunities, allocate capital and determine what is important to their decision-making.
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