Proxy season: Corporates struggle to get their ESG message across to asset owners
Despite the growing focus on net zero-related policies, many companies are struggling to communicate their green policies to their shareholders
Proxy season is in full swing and while the anti-ESG storm rages, corporates that aim to implement sustainable investment strategies find it increasingly difficult to get their net zero message across to shareholders.
So despite the growing attention on environmental, social, and governance performance, many companies are struggling to communicate their ESG policies to asset owners.
Consequently, this leads to a lack of awareness and understanding of their efforts in this area, according to Cyrus Mewawalla, head of thematic Intelligence at data and analytics giant GlobalData.
He told Net Zero Investor that “the reluctance of many CEOs to fully engage with ESG can be attributed to the age-old view that it will hurt profits."
However, Mewawalla's team found the opposite.
"Companies that embrace all three elements of ESG will outperform their peers. CEOs that are too slow to improve their company’s approach to sustainability will see an exodus of customers and a drop in profits far sooner than they ever imagined," he said.
Nevertheless, Mewawalla brought up recent research by his firm that found that 68% of respondents either believed that their company did not have an ESG plan or were unable to say whether their company had an ESG strategy.
"This speaks either to complacency or a need for more transparency surrounding ESG," he said.
GlobalData’s latest report, Global Social Responsibility Trends by Sector, 2022 – Thematic Intelligence, showed that many social issues came under the spotlight in 2022.
Unemployment above pre-pandemic levels, the impact of war on children, gender inequality, and many more factors greatly impacted social performance for businesses in 2022.
Mewawalla continued: “Any failure to demonstrate the commitment to ESG may potentially impact reputation and long-term sustainability."
He added: "As a result, businesses must prioritize ESG and take action to address the social issues that emerged in 2022 to remain competitive and meet the expectations of their stakeholders.”
Appetite for more detailed data
Mewawalla's warning comes as research shows that nearly 79 percent of businesses report data will be more important to their strategic decision-making over the next 12 months, particularly when it comes to net zero and green investment strategies.
As many corporates make bold pledges and weighty statements, asset owners are increasingly expecting hard numbers to back up their companies' claims, another industry insider told this publication last week.
To drive more confident business decisions, organisations will ultimately need to be able to rely upon trustworthy data to fuel them.
With this in mind, Pat McCarthy, chief revenue officer at Precisely, told Net Zero Investor how consistent, accurate, and contextual data will increasingly play a decisive a role in decision-making for the implementation of net zero principles.
“While stellar products and services used to be enough for companies to attract new customers, investors, and employees – and win their loyalty over time – expectations are now changing,” McCarthy explained.
Moreover, ESG’s already fast-evolving regulatory landscape is putting extra pressure on tech companies to know where they are on their net zero journeys, McCarthy added.
“This pressure will only increase," he said.
However, organisations can only create and achieve net zero targets with accurate, consistent, and contextual data for ESG reporting, he stressed.
“Data is one of the most important factors for gaining insight, measuring metrics, and filling in the gaps when it comes to net zero practices.”
Although many companies already have a data infrastructure in place, many find it is not detailed or trustworthy enough to properly report on these initiatives, McCarthy pointed out.
“Companies will find they need to establish a foundation of data integrity to make strategic decisions based on trustworthy ESG data,” he noted.
“As part of this, more companies will invest in technology that combines data integration, data governance and quality, location intelligence, and data enrichment capabilities,” McCarthy concluded.