Environmental, social and governance (ESG) factors are still hampered by too timid disclosure. Major companies remain the majority in not disclosing the attention they pay to sustainable development and the actions they take in this area. For the others, barely a third of investors believe that the quality of the information received is adequate.
In its report published this week, the accounting firm PwC Canada observes that only 41% of the 150 largest Canadian companies publish an ESG report on the place occupied by sustainable development in their strategy, according to an analysis carried out in September. 2021. We are only talking here about companies listed on the stock exchange. What then of openness and transparency among private companies?
It is added that 62% of the companies surveyed say they recognize the factors, but only 30% have established deadlines for achieving their ESG objectives. Inertia is more marked in the face of global warming. Only 35% have a formal net-zero commitment, but only 17% have set a deadline.
In a global ESG survey conducted by PwC in September, this time with investors, “nearly 80% of respondents said they consider ESG factors an important element in their investment decisions”, and half declared to be ready to withdraw their investment from companies which do not act sufficiently on this plan.
A certification process
Additionally, 73% of global investors say it is important that ESG indicators are independently certified. However, 20% of the Canadian companies analyzed have a certification process in place. And only 18% of the indicators compared to those of their competitors or other external benchmarks, in a regulatory environment where disclosure remains voluntary and where harmonization is lacking.
“Overall, the ESG information disclosed by large companies in the country does not meet the requirements of capital markets and stakeholders. This makes them vulnerable to rumors of greenwashing,” PwC points out.
Recent enthusiasm among savers
This reading should also be seen in the perspective of a still recent enthusiasm for ESG factors among so-called retail investors. At least, enthusiasm remains marginal among savers, if we stick to the data from the Investment Funds Institute of Canada (IFIC) published this week.
Assets of mutual funds and exchange-traded funds (ETFs) focused on responsible investing totaled $33.6 billion and $8.1 billion respectively at the end of 2021. This corresponds to 1.6% of total mutual fund assets and 2.4% of total ETF assets.
Beyond the low weight, IFIC finds that responsible investment funds have significantly increased their net sales over the past two years. They totaled 17.4 billion in 2021, after having remained under one billion before 2020. Admittedly, they were multiplied by 3.4 last year compared to 2020, but they followed, in this, the multiplication by 3, 6 net sales of mutual funds, in a context of increased savings accumulated during the pandemic and attractive stock market returns combined with low interest rates.
But PwC to remind that it’s not just the investors. That employees, lenders, customers, regulators and other stakeholders also base their decisions on ESG information enabling transparency and accountability.