Disseminating Critical Climate Information
Disseminating Critical Climate Information

EY Survey: 85% of investors say greenwashing is worsening

The 2024 EY Institutional Investors Survey has revealed that 85% of respondents identified greenwashing as a growing concern. 

The report highlights widespread trust issues in the reliability of Environmental, Social, and Governance (ESG) data despite its increased adoption by investment professionals.

The EY survey gathered insights from 350 decision-makers at global investment firms, including asset managers, private banks, and sovereign wealth funds. The findings revealed that while 88% of respondents have ramped up their use of ESG data over the past year, scepticism remains high.

Notably, 80% of investors called for substantial improvements in the materiality and comparability of corporate sustainability reporting, and 62% emphasized the need for greater accuracy.

Shift to Short-Term Factors

Despite heightened interest in sustainable investments, ESG considerations appear to be waning in importance for some firms. Nearly two-thirds of investors reported that their organisations might reduce the use of ESG factors in decision-making, shifting focus to immediate economic pressures.

Short-term issues such as trade restrictions and shifts in the business cycle were highlighted as top priorities for investment strategies, with 92% agreeing that near-term performance risks often outweigh the long-term benefits of ESG initiatives.

This trend contrasts with rising client demand for ESG-related investment products. According to the survey, 74% of asset managers reported increased interest in sustainable investments, and 77% noted growth in the development of these products.

Regional Variations in Climate Focus

Sustainability-related issues remain a priority, with climate change ranked as the second most influential factor affecting investment strategies by 55% of respondents. However, regional differences were evident, as investors in North America and Europe were more likely to cite climate change as a key driver compared to peers in other regions.

The “Say-Do” Gap

EY’s findings highlight a “say-do gap,” where investor actions often fall short of their stated commitments to sustainability. This discrepancy is exacerbated by the perception of inadequate corporate sustainability reporting. Investors cited greenwashing as a growing challenge, with 85% believing it has worsened over the past five years.

Preparing for New Standards

The survey’s release comes as regulatory frameworks like the EU’s Corporate Sustainability Reporting Directive (CSRD) and the IFRS Foundation’s ISSB standards aim to enhance transparency in sustainability reporting. However, investor confidence in these frameworks is mixed. Only 34% of respondents believe the CSRD standards are clearly articulated, although a majority view both CSRD and ISSB standards as promising for long-term investment decisions.

In response to these changes, 56% of investors reported prioritizing expertise in these standards when hiring, while 49% are providing relevant training, and 45% are investing in supporting technologies and systems.

Driving Change

Dr. Matthew Bell, EY’s global climate change and sustainability services leader, and Velislava Ivanova, EY’s global strategy and markets leader, emphasised the need to bridge the say-do gap.

“Closing the gap is vital to allocating more capital to impactful projects,” they noted, adding that sustainability should be viewed as both a risk and a value driver for investment strategies.

As the demand for credible ESG data grows, the survey highlights the need for robust, transparent, and standardized reporting to restore investor confidence and support long-term sustainability goals.

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