Can Improvements in Sustainability Data Help Public Companies Earn Trust With Large Investors?

New research from Deloitte and The Fletcher School at Tufts University investigates

NEW YORK, March 12, 2024 /PRNewswire/ -- As sustainability becomes a more common consideration for investment management professionals in the United States, trust in the environmental, social and governance (ESG) data used to inform investment decisions by asset owners and managers is lagging, according to a new global study titled "Investor trust in sustainability data" from Deloitte and The Fletcher School at Tufts University.

The survey found that sustainable investing has grown significantly in the U.S. over the past five years, with 83% of U.S. investment management professionals surveyed reporting that they have a sustainable ESG investing policy in-place (e.g., any policy that takes environmental, social or governance concerns into consideration when measuring the sustainability impact of a business or investment). That is a considerable shift compared to just 27% five years ago, according to the recent survey. In fact, just 1% of respondents indicate that their organizations have no plans to adopt a sustainable investing policy.

The use of ESG information — including ESG disclosures and ESG-related reports, communications, third-party ratings, and other information — to support fundamental analysis is also widespread among polled U.S. investors, with 81% reporting they occasionally or regularly seek out sustainability information as part of due diligence efforts.

"Many factors, including evolving regulatory requirements, financial performance pressures, and stakeholder expectations, are driving the U.S. movement toward integrating sustainability and ESG into investment decision-making," said Chris Ruggeri, a Deloitte Risk & Financial Advisory principal and sustainability, climate and equity leader, Deloitte Transactions and Business Analytics LLP. "As such, company leaders and their boards have an important opportunity to take actions that can improve investor confidence and trust levels in those investments, such as making enhancements to the sustainability information, disclosures, and other sources that inform buy, sell, and hold decisions."

ESG data concerns from investment managers

Despite the growing demand for sustainability information, U.S. investment management professionals expressed concern over the availability of and access to clear, reliable and trustworthy ESG data to incorporate into their investment approaches. According to respondents, lack of measurable outcomes discernible from corporate disclosures (60%), lack of clarity on how to integrate ESG information (63%), and inconsistency or incomparability of ESG ratings data (63%) are inhibiting their organizations' abilities to effectively implement ESG investment strategies.

"There is considerable room for improvement in how organizations collect, measure, report on, and validate sustainability data to earn investor trust," said Michael Bondar, a Deloitte Risk & Financial Advisory principal and global enterprise trust leader, Deloitte Transactions and Business Analytics LLP. "But, more consistency and dependability in sustainability reporting for measurement and analysis purposes should help enhance confidence for stakeholders throughout the corporate ecosystem."

Added Bhaskar Chakravorti, dean of Global Business at The Fletcher School at Tufts University: "The focus on sustainability data is growing globally. India's Securities and Exchange Board requires top public companies to disclose ESG related activities, and the European Union now requires sustainability disclosures under the Corporate Sustainability Reporting Directive starting from periods beginning in 2024. And as of this month, rules were adopted in the United States as well."  

You can access the full report here.

About the study

Deloitte and The Fletcher School at Tufts University surveyed more than 1,000 asset management professionals from North America, Europe and Asia in August 2023 for perspectives on sustainable investing and trust levels in sustainability disclosures from publicly traded companies. Within that data set, more than 300 U.S. investment professionals, including asset managers (38%), investment advisers (32%), and asset owners (30%; e.g., pension funds, family offices, and sovereign wealth funds) shared thoughts that are recapped in this press release and corresponding report, titled "Investor trust in sustainability data."

About Deloitte

Deloitte provides industry-leading audit, consulting, tax and advisory services to many of the world's most admired brands, including nearly 90% of the Fortune 500® and more than 8,500 U.S.-based private companies. At Deloitte, we strive to live our purpose of making an impact that matters by creating trust and confidence in a more equitable society. We leverage our unique blend of business acumen, command of technology, and strategic technology alliances to advise our clients across industries as they build their future. Deloitte is proud to be part of the largest global professional services network serving our clients in the markets that are most important to them. Bringing more than 175 years of service, our network of member firms spans more than 150 countries and territories. Learn how Deloitte's approximately 457,000 people worldwide connect for impact at www.deloitte.com. 

As used in this document, "Deloitte" means Deloitte Transactions and Business Analytics LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of our legal structure. Certain services may not be available to attest clients under the rules and regulations of public accounting.

SOURCE Deloitte