Greenwashing Prevalent In Corporate Reporting|
December 13, 2022
2022 Global Investor Survey paints a picture of investors juggling multiple
priorities with limited information.
While investors see inflation (67%) and macroeconomic volatility (62%) 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. Almost
half (44%) of the investor community surveyed believe that tackling climate
change should be a top five priority for business. This contrasts with lower
scores for societal ESG issues such as protecting worker health and safety (27%)
and improving workforce diversity and inclusion (25%). The top priority
identified for business was innovation (83%), followed by maximising
There are trust issues
However, investors are dealing with a difficult information environment and have
a low degree of trust in corporate sustainability reporting. Investors largely
believe corporate reporting contains unsupported claims about a company’s
sustainability performance. Three quarters (78%) said ‘unsupported claims’ were
present to a moderate, large or very large extent, rising to 87% including those
who said they were present to a limited extent. Just 2% said corporate reporting
does not contain unsupported claims about sustainability performance.
Information from ESG ratings agencies is not filling the trust gap, with just
22% of investors surveyed saying they use 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
Climate focus is a commercial priority
Investors see addressing climate change as commercially advantageous. Two thirds
(64%) say their focus on ESG investing is out of a desire to increase investment
returns, and 68% said protecting investment returns was also a motivator.
Overwhelmingly, 82% say it is a response to the demands of their clients.
This pattern reflects growing awareness of climate change as a potential
material risk to business. One in five (22%) believe companies will be highly or
extremely exposed to climate risk in just the next 12 months, and the number
reaches 37% over a five year time horizon, matching concern about geopolitical
conflict (also 37%). Over a ten year horizon, the energy transition (50%) almost
ties with technology change (53%) as the trend most likely to have a large or
very large impact on profitability.
Investors are supportive of significant public policy measures to tackle climate
change. By a margin of 28 points, they are more likely to think that imposing
taxes on unsustainable activities would be ‘effective’ rather than ‘ineffective’
in encouraging corporations to take action on sustainability issues. The margin
for support of strong reporting requirements is 34 points and for targeted
subsidies it is 20 points.
66% of investors 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 understand the full economic effect of their
business decisions; only 13% disagreed. Additionally, nearly three-quarters
(73%) of investors want companies to report the cost to meet the sustainability
commitments they have set.
Jackson-Moore, Global ESG Leader, PwC UK said: “Even in a challenging economic
environment, almost half of the investor community sees climate change as a top
five priority for business. Delivering net zero transformation is a crucial step
towards achieving commercial imperatives and attracting capital. Investors
expect business to be able to change in ways that enhance profitability, build
trust and deliver sustained outcomes.”
Having trust in sustainability reporting is critical for investors. On the
subject of assurance, three-quarters (75%) 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 (72%) said
it is important that assurers are subject to independence and ethical standards,
and 73% highlighted the importance of professional scepticism. Having knowledge
of the subject matter being assured, tops the list (78%) of qualities investors
want to see in assurance practitioners.
James Chalmers, PwC Global Assurance Leader, PwC UK, said: “Independently
assured information helps to build trust in capital markets and in companies’
performance on key issues like sustainability. But to build trust effectively,
assurance must be high quality, with strong professional standards and a
combination of audit and subject matter expertise.”