Key Impact Points:
- 85% of investors see greenwashing as a larger issue now than five years ago, raising concerns over corporate transparency.
- 92% of investors are reluctant to sacrifice short-term gains for long-term ESG benefits, signaling a shift away from sustainability priorities.
- 36% of investors express dissatisfaction with corporate progress on nonfinancial reporting, highlighting the need for clearer and independently audited disclosures.
Investors’ Short-Term Focus Undermines ESG Momentum
A recent EY Institutional Investor Survey reveals a growing disconnect between investors’ stated commitment to ESG principles and their actual investment behaviors. The survey polled 350 decision-makers globally, including asset managers, wealth managers, and pension funds.
Despite 88% of respondents indicating an increased use of ESG information, a significant 92% remain unwilling to prioritize long-term ESG benefits over immediate returns. Additionally, two-thirds (66%) anticipate ESG considerations will hold less weight in future investment decisions.
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Dr. Matthew Bell, EY Global Climate Change and Sustainability Services Leader, stated:
“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. Many investors do make the right noises on climate change but there’s a real failure to walk the talk.”
Rising Greenwashing Concerns
The survey highlights widespread skepticism about the authenticity of corporate sustainability claims, with 85% of investors identifying greenwashing as a growing problem. This mistrust extends to nonfinancial reporting:
- 36% of investors believe companies have not made enough progress in this area.
- 80% demand clearer material statements in reports, allowing for easier comparisons.
- 64% call for independent audits of sustainability disclosures to enhance credibility.
Limited Readiness for Long-Term ESG Analysis
The findings reveal investors’ preference for short-term impacts:
- Only 25% feel equipped to assess the long-term implications of ESG policies.
- 57% are focused on immediate outcomes.
Dr. Bell warned:
“Unchecked climate risks can spell disaster for companies and their financial backers, so it’s incumbent on investors to know what they’re putting their money into. Equally, climate action can open the door to strong growth – but these are opportunities easily missed by investors who haven’t done their homework.”Related Article: COP29 Glossary: Key Climate Terms Explained
Confidence in Decarbonization Targets Persists
Interestingly, 93% of investors express confidence that companies will achieve their decarbonization and sustainability goals. However, only 17% actively monitor changes in corporate climate policies, raising questions about the basis for such optimism.
“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,” Dr. Bell concluded.
The report underscores the urgent need for greater alignment between investors’ ESG commitments and their investment strategies to drive meaningful climate action.
