According to the PwC Global Investor Survey 2022, almost nine in ten investors (87%) believe that companies’ current sustainability reports contain unsubstantiated claims, and 69% say they should be prepared with the same rigor as financial statements .

In addition, they believe that the information provided by ESG rating agencies does not cover a trust deficit, with only 22% of surveyed investors saying they use them to a great or very great extent.

“Investors are concerned about the risks of the phenomenon of “greenwashing”, which undermines their confidence in the real commitment of companies to sustainable development. For this reason, companies must ensure that corporate reports are transparent and provide relevant and accurate information about their impact on society and the environment based on measurable and comparable indicators. In other words, numbers and financial results are no longer enough to convince investors that an external audit will increase the credibility of sustainability reports. In the EU, the first step in this direction was taken in November 2022, when the European Parliament adopted the Corporate Sustainability Reporting Directive, which clarifies the rules that companies will have to follow in the reporting process, and EFRAG (European Advisory Group) . for financial reporting) presented the first proposal for a set of rules that will enter into force on January 1, 2024,” said Monika Movilianu, Partner and Head of ESG PwC Romania.

The report shows that two-thirds of investors would like companies to disclose the impact of their activities on the environment or society. In addition, nearly three-quarters (73%) of them believe that companies should also report on the costs of meeting their sustainability commitments, the report added.

As for auditors, three-quarters of respondents say that their expertise and training in sustainability reporting is a must, and assessments should be based on independent standards.

Investors increasingly rely on the quality of reporting

Investors have pointed to some notable weaknesses in companies’ performance on two levels: achieving results that matter to investors and reporting on those efforts. As such, the report highlights the challenge investors face in evaluating how companies are achieving their goals. This may explain why investors favor some sources of information over others when evaluating how companies manage risks and opportunities.

If investors believe that companies’ financial statements are insufficient to help them assess their priorities, they will have difficulty allocating capital to those priority areas.

The outcomes that investors want companies to prioritize in reporting are: achieving profitable financial performance, ensuring effective corporate governance, and ensuring data security and privacy.

About the report: In September and October 2022, PwC surveyed 227 investors and analysts from 43 countries/territories around the world.

Article supported by PwC Romania