Investor Survey 2023

PwC’s Investor Survey 2023 asked 345 investment professionals worldwide for their insights into the factors influencing their investment decisions. It also assessed investors’ trust in the data available to them to evaluate investment choices. The Irish responses are consistent with the global findings: sustainability and emerging technologies (including artificial intelligence) are areas of prime investor interest. Investors want to understand how companies manage the associated opportunities and risks as they drive future business transformation. However, they are hampered by a trust deficit in much of the information shared.

Sustainability is increasingly coming to the fore in the minds of investors in Ireland

While inflation, macroeconomic volatility and geopolitical conflict remain the top three threats anticipated by Irish and global investors over the next 12 months, the threat of climate change has grown in importance in the minds of investors in Ireland. It now ranks ahead of cyber risk, indicating an increasing recognition among the investment community that climate risk is no longer tomorrow’s problem.
 

Overwhelmingly, investors in Ireland want to understand how sustainability is being taken into account across all facets of the business—from how companies factor it into strategic decision-making to how they manage the associated risks and report on it. Just as importantly, they want to know how much reliance they can place on the information available to them—but there is a lack of confidence in much of the information disclosed.

More than 80% of investors in Ireland consider sustainability-related risks and opportunities as important factors in investment decision-making, with almost 90% believing that companies should embed ESG in their corporate strategy. This is higher than the other 29 countries surveyed, suggesting that the green agenda is front of mind for investors in Ireland.

Investors also want to know how companies create value from climate change transition and adaptation. In particular, they’re interested in the correlation between a company’s sustainability plans, business model and potential for long-term value creation. In support of this, most investors in Ireland acknowledge the importance of spending to address ESG issues—even at a cost to short-term profitability—with only 8% disagreeing.

Given the importance of climate and sustainability for companies’ future resilience and value-creation potential, it’s no surprise that investors in Ireland want comprehensive reporting of sustainability-related data they can trust to support investment analysis and decision-making. In particular, the investment community values information relating to the company’s roadmap to meet sustainability commitments and the associated cost, as well as the effect of sustainability risks and opportunities on the company’s financial statement assumptions and the company’s impact on the environment and society—both now and in the future.

Failure to adapt to sustainability risks and opportunities is a losing strategy for business. Reporting will show who is creating value from ESG opportunities and who is at risk.

While climate change emerges as a key value driver, technological change is ranked by investors in Ireland as the factor most likely to influence how companies create and protect value in the next three years (68%).
 

The potential for emerging technologies (including AI, blockchain and the metaverse) to generate opportunities for reinvention and business transformation through improved productivity, new sources of growth and new business models is attractive to companies and investors alike. 58% of investors in Ireland identified the accelerated adoption of AI as very important to the businesses they invest in.

Investors in Ireland expressed greater caution around AI than their global counterparts. Recognition of the importance of accelerated AI adoption is tempered by concerns about data security and privacy and insufficient governance processes and controls—more so than in the other territories surveyed.
 

Both companies and investors must be mindful of balancing the risks associated with emerging technologies such as AI with the potential for growth and reinvention. As with all new developments, policies and controls are being developed as emerging technologies and AI evolve, so investors may be unable to access the desired level of information in the short-term.

Like their global counterparts, investors in Ireland rely on different information sources to assess how companies manage the risks and opportunities facing their businesses.
 

The survey responses suggest a number of reasons: the availability of a multitude of different information sources; a lack of completeness in any individual data source; and a reluctance among investors to place their trust in any single source of information. For example, less than 40% of investors say that available quantitative and qualitative climate information informs their investment decision-making to a large extent.

Unsurprisingly, investors want greater transparency, consistency and comparability of information on the material issues facing companies to enhance their investment appraisal. Companies prioritising this will enhance their awareness of risks and opportunities, which can drive more informed business decisions and communications with key stakeholders.

In their responses to our survey, investors in Ireland expressed clear preferences for information published by the companies themselves (such as investor-focused communications and financial statement notes and disclosures), as well as direct engagement with companies. But what’s behind this? Is there a lack of familiarity with third-party and alternative data sources, or potentially a lack of trust? Or is it indicative of a preference among investors in Ireland for more direct communication and engagement with the companies they invest in?

When asked about the degree to which they trust 17 different sources of information, investors in Ireland expressed much lower levels of trust in information from social media and generative AI than investors in other territories. Recommendations from proxy advisors, ratings and scores from ESG providers, and alternative data also ranked relatively low on the trust score.
 

Notwithstanding that, almost all investors in Ireland (97%) believe that corporate reporting contains at least some unsupported claims about a company’s sustainability performance—greenwashing, in other words. In fact, sustainability disclosures were the least trusted sources of information published by companies.

The desire for transparency and consistency in company information, coupled with greenwashing concerns, are key drivers for investors’ openness to regulators and standard-setters intervening in corporate reporting. 

Most investors (50%) believe that adhering to forthcoming sustainability reporting regulations and standards, including CSRD, the SEC-proposed climate disclosure rule in the US and ISSB standards, will satisfy their information needs for decision-making to a large or very large extent.

Trust-related issues prompt investors and companies to place increasing value on independently assessing reported information. Despite some scepticism of sustainability disclosures, investors express confidence in assurance mechanisms when scrutinising the accuracy of the sustainability information reported by companies. Currently, most sustainability reporting is not independently assured.

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Companies can address the issues that matter most to investors by taking action on two fronts: 

How we can help

Whether you operate in an environment replete with opportunity or risk, it can be hard to know how to maximise return on your efforts. This is especially true in a world where the pace of change is ever-increasing, and the data to inform decision-making is growing exponentially.

We can leverage the knowledge and experience gained from businesses in your industry and beyond to cut through the noise and help you focus on what matters most.

To discuss any of the topics in this article or any other business issue that’s on your mind, contact one of the team members listed below.