A recent survey by Workiva has revealed significant enthusiasm among investors for new sustainability-related reporting regulations.
According to ESG Today, this includes the European Union’s Corporate Sustainability Reporting Directive (CSRD) and the United States Securities and Exchange Commission’s (SEC) climate reporting rules.
The survey, titled Executive Benchmark on Integrated Reporting 2024, which polled nearly 900 executives from companies with revenues exceeding $250m and over 100 institutional investors across North America, has highlighted a strong belief in the importance of high-quality Environmental, Social, and Governance (ESG) data in facilitating superior investment decisions.
Despite facing political opposition in the US, more than 80% of North American investors maintain that their approach to investment decisions remains unchanged, demonstrating robust support for emerging ESG disclosure regulations. Remarkably, around 90% of investors are confident that new sustainability reporting regulations will enhance their investment decision-making capabilities. Additionally, the significance of ESG data in assessing a company’s long-term financial outlook is acknowledged by 92% of investors, with 88% advocating for the treatment of ESG data with the same rigor as financial data.
However, the survey also uncovers the challenges faced by companies in complying with these new sustainability reporting obligations. A substantial 74% of executives foresee increased difficulty in meeting regulatory reporting requirements in the forthcoming year, with technology identified as a major concern. About two-thirds of respondents are worried about their ability to meet new regulatory demands, emphasizing the need for improved reporting technology.
The integration of financial and ESG reporting is seen as beneficial, with 85% of executives agreeing that it simplifies regulatory compliance. Those actively integrating ESG with financial reporting are notably more confident in their ability to adhere to the new SEC climate reporting rule.
Workiva ESG Advisor Diana Tidd highlighted the struggle executives face with the upcoming surge in ESG regulations, underscoring the demand for better control over data and scalable regulatory compliance solutions.
Investor support for integrated reporting is evident, with a strong preference for investing in companies that merge financial and ESG reporting. The call for third-party assurance of ESG data further underscores investor interest, with 88% more likely to invest in companies that obtain such assurance.
The study also explores obstacles to integrating financial and ESG data, including the complexity of data collection and regulatory changes. A promising solution to these challenges appears to be generative AI, with a majority of executives optimistic about its potential to aid compliance, despite reservations about data security.
Workiva ESG Advisor Paul Druckman reflected on the survey’s insights, highlighting the consensus among executives and investors on the necessity of integrated reporting for a comprehensive understanding of corporate performance.
Keep up with all the latest FinTech news here.
Copyright © 2024 FinTech Global
