A study by EY has uncovered a concerning trend among global investors, highlighting a preference for short-term financial gains over the long-term benefits of ESG investments.
The 11th annual EY Institutional Investor Survey, which gathered insights from 350 key decision-makers across various financial sectors including asset management, wealth management, insurance, and pensions, reveals a significant discrepancy between the rhetoric and real actions of investors regarding ESG.
Despite an overwhelming majority (88%) of respondents acknowledging an increased use of ESG information over the past year, the survey indicates a stark lack of priority given to ESG factors in actual investment decisions. A notable 92% of investors are not willing to compromise short-term performance for the potential long-term benefits of ESG-focused investments. Moreover, two-thirds (66%) predict a decrease in the relevance of ESG considerations in future investment decisions.
Dr. Matthew Bell, EY Global Climate Change and Sustainability Services Leader, expressed concern over the apparent disinterest in sustainability within the investor community. “While many vocalize support for climate action, there is a significant shortfall in tangible commitment, exacerbated by a focus on immediate profitability rather than enduring value from ESG investments,” Bell commented.
The survey also highlights a lack of preparedness among investors to assess the long-term impacts of ESG policies, with only 25% feeling equipped to evaluate such outcomes, compared to 57% who are comfortable assessing immediate effects. Additionally, over half of the respondents (55%) doubt that climate change will influence their investment strategies significantly.
Greenwashing remains a critical issue, with 85% of investors recognizing it as an escalating concern. The report suggests a need for enhanced clarity and comparability in nonfinancial reporting, with 80% of participants calling for reports that more effectively highlight significant data. Moreover, 64% of investors see a pressing need for independent auditing of sustainability disclosures.
Dr. Bell emphasized the potential for positive growth through climate action, stressing the importance of investor diligence. “Unchecked climate risks are disastrous, not just for the environment but for investors themselves. By overlooking the value that sustainability can offer, investors miss out on substantial growth opportunities in climate finance,” he said.
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