Nearly three-quarters (74 per cent) of institutional investors said they’re more likely to divest from companies with poor environmental, social and governance track records, according to a new survey by EY.
The survey, which polled more than 320 global institutional investors, found the vast majority (86 per cent) said they’ll invest in companies that have an aggressive carbon footprint reduction strategy or a low-carbon footprint. In addition, 90 per cent said they now attach greater importance to ESG performance in their decision-making than they did before the coronavirus pandemic and 92 per cent said they’ve made decisions over the past 12 months based on the potential benefits of a “green recovery.”
“The COVID-19 pandemic has been a powerful catalyst to laser focus on all facets of ESG, putting pressure on both companies and investors to assess risks effectively and meet increasing stakeholder demand on addressing climate, social and governance issues,” said Thibaut Millet, EY Canada’s climate change and sustainability services leader, in a press release.
However, despite the sharpened focus on ESG performance, fewer than half of survey respondents said they’ve taken action to update their investment policies and frameworks (49 per cent) or revamp their risk management strategies (44 per cent).
“Although there are clear intentions to look more closely at ESG risks across portfolios and investment targets in the future, institutional investors have been relatively slow to make concrete changes to the way they operate,” said Millet.
Meanwhile, half (50 per cent) of respondents said they don’t believe companies are reporting adequately on financially relevant ESG issues, such as revenue growth or required capital and risk, ultimately pushing 89 per cent of investors to call for mandatory global standards.
“Uniform global standards are critical to build accountability and deliver transparent measurement and high-quality disclosures around ESG performance, which in turn can underpin good business management and help to build and preserve stakeholder trust,” said Millet.