7 March 2022

Many investors distrust ESG reporting. Can science-backed insights help?


By Cervest

Many investors distrust ESG reporting. Can science-backed insights help?

Companies preparing 2022 ESG reports still have time to upgrade their climate risk analysis with science backed, data-driven insights. 

For many companies, the beginning of April signals the start of reporting season; a long, often arduous period when annual accounts are readied for employees, shareholders, and other essential stakeholders. These reports hold significant influence over how a business is viewed by the outside world. They also represent a unique opportunity for senior leadership to broadcast recent accomplishments and strategies moving forward. 

In response to mounting pressure from regulators, investors and consumers to adhere to sustainable practices, an increasing percentage of companies are incorporating information on their Environmental, Social and Governance (ESG) efforts into their annual reports. In fact, according to KPMG’s latest Survey of Sustainability Reporting, 80% of businesses worldwide now issue sustainability reports on a regular basis. 

If your company is looking to publish an ESG report this financial year, check out Cervest's free ebook on how to enhance your disclosures with automated climate risk insights.

Moving towards TCFD-aligned disclosure

For many of this 80%, discovering, analyzing and disclosing climate risks, in line with the framework recommended by the Task Force on Climate-related Financial Disclosures (TCFD), has become a key part of their reporting cycle. With the UK’s new mandatory climate-related financial disclosure regulations coming into force on 6th April 2022, and the US seemingly close behind, the number of companies divulging climatic risks is only going to rise. 

While there is both growing appetite and expectation to make climate-related disclosures - a record 14,000 companies made voluntary climate-related disclosures through CPD last year - many stakeholders doubt the quality and usefulness of ESG reporting. One PwC survey found less than 40% of investors trust “the information they get from ESG ratings and scores”, while just 33% would rate the quality of ESG reporting they receive from companies as “good”.

"Less than 40% of investors trust “the information they get from ESG ratings and scores.”

PwC 2021 Global ESG Investor Survey

Upgrading ESG reporting

One of the main causes for this sentiment is that many companies face significant barriers to qualifying their climate risk in such a way that it can feed accurate and comparable financial disclosures. According to Cervest’s 2021 climate-related financial disclosure survey, these barriers include the complexity of aggregating data (46% of decision makers agreed), mistrust in data integrity (44%), a lack real-time and actionable intelligence (43%), and a lack of adequate tracking and reporting (43%). 

To break down these and other barriers to more accurate and decision-useful disclosures, business decision makers should consider investing in new, cutting-edge products, like EarthScan, that combine up-to-date climate science with the latest machine learning techniques. These products enable decision makers and sustainability teams to discover the climate risks facing their assets across multiple climate scenarios and time periods. 

This decision ready insight can then be used to instantly upgrade the quality of their reporting, enabling them to satisfy the requirements of UK disclosure regulations, and meet the demands of investors and other external stakeholders, all while reducing administrative burden. 

Learn more about insight-driven ESG reporting

Want to learn more about upgrading your ESG reporting with climate science and asset-level insights this year? Check out Cervest’s free ebook.

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