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PricewaterhouseCoopers (PwC) Limited

Environmental, social and governance (ESG) factors have become crucial to investors across the world, a study conducted by PwC has found.

The PwC 2021 Global Investor ESG Survey, which was conducted online in September 2021, revealed that ESG has now become a make-or-break consideration for leading investors globally.Almost half (49 % of the 325 investment professionals from 43 territories, expressed willingness to divest from companies that aren’t taking sufficient action on ESG issues. More than half, 59%, said lack of action on ESG issues makes it likely they would vote against an executive pay agreement, while fully a third stated they have already taken this action.

The report revealed a large majority, 79%, said the way a company manages ESG risks and opportunities is an important factor in their investment decision making.

PwC conducted an additional 40 in-depth interviews with investors and analysts who have overseen more than a combined US$11.6 trillion assets under management. Most investors said they were likely to take action if companies are not doing enough to address ESG issues, with most stating that they don’t want a company’s action on ESG to significantly impact their investment returns. The vast majority, 81%, said they would accept no more than one percentage point less in investment returns for pursuit of ESG goals; nearly half, (49%), were unwilling to accept any reduction in returns.

James Chalmers, Global Assurance Leader, PwC UK, said:“Our research shows investors are simultaneously focused on short-term results as well as the longer-term societal issues that can create both risks and opportunities for their investments. It is clear that investors expect ESG to be an integral part of corporate strategy. That includes making expenditures to address ESG issues, while clearly communicating the rationale and benefits to the business strategy. If investors don’t see that commitment, they won’t hesitate to take action and that can include divesting their position in a company and taking their clients’ money elsewhere.”

Investors also stressed it was important for companies to be clear about their ESG-related commitments, as 83% surveyed said it is important that ESG reporting provide detailed information about progress toward ESG goals. However, PwC stated, “It is concerning that only one third of investors surveyed, on average, think that the quality of ESG reporting they are seeing is good.”

Zia Paton, PwC in the Caribbean Digital Services leader,commented: “Our 2021 Caribbean Digital Readiness Survey revealed that more than 80% of companies were focused on modernising their brands with new digital capabilities. This will augur well for Caribbean companies as they work to define their ESG Strategy and build their capability in ESG reporting. Data management and clear data driven communication will be imperative to get the right messages to all stakeholders. As the move to mandatory reporting heightens at the Global level, companies that are already on the journey to embedding ESG and improving data capabilities can expect to reap benefits.”