Companies are now expected to show progress on ESG, but investors don’t always believe what’s reported.
In a previous post, we discussed that while US investors seem to be willing to walk the walk on impact and ESG, there are limits to how much they’re willing sacrifice in the way of returns in order to make an impact. There are definite signs that America may be poised to grow as a destination for ESG investment, but it remains to be seen how committed both institutional and private investors in the US really are when it comes to impact.
According to new research, one thing that may be keeping investors from acting on their desire for more socially and environmentally responsible investment products is a lack of trust in the information they receive.
In the November 2021 issue of JTC’s ESG Insight Newsletter, an article titled, “Revealed: A Lack of Trust in What Companies Say About ESG” sheds light on the issue by examining responses to a recent survey. In it, 95% of US investors said they were “interested in taking an activist approach to investing.” That’s an encouraging number if you’re offering impact investments, though interest is not the same as action.
In the same survey, 86% of US investors said they “believe that companies frequently overstate or exaggerate their ESG progress when disclosing results,” and 72% globally said they “don’t believe companies will achieve their ESG commitments.”
US investors may say they want to invest in impact and ESG, and that they’re willing to accept lower returns in order to do so. But they also say they don’t trust companies who claim to be making an impact. Anyone looking for an excuse to avoid walking the walk on ESG has found it: if you can’t trust your investment will do the good it’s supposed to, what’s the point of investing in ESG at all?
What this shows is that having ESG policies or offering impact investments won’t be enough to win over skeptical investors. They like the idea of impact, but they’ve been jaded by “greenwashing,” token initiatives that are used for PR purposes but that don’t have any real effect. The firms that separate themselves from the pack will be those that can actually prove their impact investments and ESG policies are working.
That’s why JTC has been a leader in pioneering methods to measure social impact and evaluate impact across different kinds of investments. JTC was also awarded the “Fund Administration: ESG” award at the 2021 Drawdown Awards thanks to its industry-leading technology and solutions like real-time impact monitoring and reporting.
By presenting investors with hard data, you’ll be proving your commitment to impact and demonstrating that your ESG policies are real. And if the numbers show your investments are not only financially sound, but more impactful than others, you’ll create trust that can last a lifetime.
There are other actions companies are taking to build trust with investors that are mentioned in the article, which appears in the November ESG Insight Newsletter alongside coverage of the COP26 Climate Summit in Glasgow and a breakdown of a recent proposal from the Department of Labor.