EY Survey: 3/4 of Institutional Investors May Offer Investment From Companies With Unsatisfactory Environmental Performance

According to the Sixth Global Institutional Investor Survey of the EU (Sixth Global Institutional Investor Survey, November 2021), which includes the views of 320 institutional investors from 19 countries, 90% of respondents say they now attach more importance to ESG criteria in the process decision-making, than before the COVID-19 pandemic.

At the same time, 74% are now more likely to invest in companies with unsatisfactory ESG performance, while 92% say they have made decisions in the last 12 months based on the potential benefits of a “green recovery”. However, investors are still demanding improved ESG disclosures and more specific business action plans.

There are also clear intentions by the majority of investors to look more closely at the risks associated with climate change in relation to their investment portfolios and targets in the future. In particular, more than three-quarters (77%) of respondents say they plan to step up their natural hazard analysis over the next two years – the impact, that is, the natural impact of climate change, on a business’ ability to deliver its products seamlessly. and its services, while 80% are willing to do more to assess the transition risks – that is, the market effects that can result from the transition to a low carbon economy. These percentages are increased compared to 2020, which were at 73% and 71% respectively.

In terms of business evaluation criteria based on whether they are able to achieve their ESG objectives, the survey shows that institutional investors before making investment decisions, among other things, consider: whether there is an executive responsible for ESG issues ( Chief Sustainability Officer), who reports and collaborates directly with the CEO and the management team (53%), if the company’s organizational culture is in line with ESG objectives (52%), as well as if ESG notifications and indicators (48%) of the company have independent guarantee. However, only 42% are concerned about whether Boards oversee ESG performance, or whether executives’ remuneration is linked to it.

Despite the increased focus on ESG performance and targets, the survey shows that institutional investors have been relatively slow in making any relevant changes to the way they operate. Only 49% have taken steps to update their investment approaches and only 44% have updated their crisis and risk management strategies. At the same time, only 44% believe that they have an “extremely mature” approach to the risks associated with climate change.

Many investors are concerned about the quality and transparency of the reports on ESGs submitted by the companies in which they are considering investing. Half of them (50%) believe that companies do not adequately communicate information on the essential financial issues they face. This is a significant increase from the corresponding 37% recorded in the 2020 survey.

However, there is a clear hope that the introduction of global standards will help in this context, as 89% of investors surveyed say they want these standards to be mandatory.

Commenting on the report, Ms. Kiara Konti, Associate Partner in the Department of Climate Change and Sustainable Development Services of EV Greece, said: “The pandemic acted as a catalyst, highlighting social and environmental challenges related to the needs and expectations of all stakeholders. , as well as how non-financial issues, such as climate change, actually pose risks and create opportunities with direct financial impacts.EY’s global survey confirms that the majority of institutional investors today take the ESG performance of companies in their investment decisions and are willing to withdraw their funds from companies with unsatisfactory performance.

“However, we need to move faster in this direction if we want entrepreneurship to help us in our efforts to achieve the goals of sustainable development and, in particular, to tackle and adapt to climate change. The adoption of objective and commonly accepted indicators “for ESG performance, it will be an important step, which is expected to affect the way companies communicate their ESG performance, both globally and in Greece.”