EY’s Institutional Investor Survey has reported that 92 per cent of investors are reluctant to sacrifice short-term gains for the longer-term rewards of ESG investments and two-thirds say ESG factors are likely to have less weight in their firm’s future investment decisions.

The survey, now in in its 11th year, canvasses the views of 350 key decision-makers from investment firms around the world including asset managers, wealth managers, insurers and pension funds and explores the extent to which they are building sustainability into their investment strategies, as well as their use of sustainability reporting in making investment decisions.

The findings suggest there is a significant gap between investors’ statements on the importance of ESG and the action they are taking. Almost nine in ten of those surveyed (88 per cent) say that their firms have made more use of ESG information over the past year, reflecting huge growth in corporate reporting and the proliferation of information needed to guide reporting. However, ESG issues do not appear to be a priority when it comes to decision making.

Only slightly more than half of the investors surveyed (55 per cent) believe climate change will have any impact at all on their investment strategies, Furthermore, when investors do consider nonfinancial performance in their decision-making, they are much more comfortable looking at the immediate future than further ahead. Only 25 per cent of respondents say they are equipped to assess the long-term impacts of ESG policies and performance, while 57 per cent say they feel able to look at short-term impacts.

Dr Matthew Bell, EY global climate change and sustainability services leader, said: “In some ways, it’s understandable that investors are being passive, they are rightly worried about the many holes in company reporting, but what’s less forgivable is the apparent search for instant gratification when it comes to profitability.”

Other barriers include a suspicion of greenwashing, with almost nine in ten investors (85 per cent) seeing it as a bigger problem than it was five years ago, and only 17 per cent saying they monitor changes in companies’ climate policies, despite the vast majority claiming they are confident that companies will still meet their targets for sustainability and decarbonisation.

As always, information is still too patchy and disjointed, with eight in ten saying reports need to more clearly highlight material statements and be produced in a way that makes them easier to compare with other company reports. Nearly two thirds (64 per cent) say there is a need for independent auditing of companies’ sustainability disclosures.

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