Wide gap between companies and shareholders on ESG reporting

There is a significant 'disconnect' between companies and their shareholders when it comes to reporting on ESG. Companies and investors are not aligned in their views on the best ways to weave sustainability into corporate reporting. This is according to a global survey by consultant and auditor EY that also has great significance for the real estate sector.

Asset-level information can be key to mutual understanding, but expectations around stakeholder transparency are not being met, according to the EY Global Corporate Reporting and Institutional Investor Survey. Three quarters of investors surveyed said that "companies are highly selective in the information they provide to investors, raising concerns about greenwashing. More than three-quarters of investors (88%) say 'unless there is a legal requirement to do so, most companies only provide us with limited ESG information useful for decision-making.'

Companies need to clarify long-term investors' expectations on sustainability, the survey says. Companies continue to invest more time, resources and leadership efforts in sustainability. However, there is still a large gap between the expectations and goals of companies and their investors when it comes to corporate and sustainability reporting - particularly ESG information that (along with existing financial statements) can help companies and their stakeholders communicate and assess performance against strategic risks and opportunities across multiple dimensions.

This disconnect could potentially undermine the proper functioning of capital markets, the collective fight against threats such as climate change, and the trust needed between a company and its stakeholders, including customers, employees and communities. EY examined these issues using a methodology that surveyed 1,040 senior financial leaders at reporting companies and 320 institutional investors as users of that information. Three key themes emerge for the future of corporate reporting:

The gap between companies and investors: There is a significant gap between companies and investors when it comes to maintaining a focus on long-term value creation and sustainable growth, and avoiding short-termism.
The importance of effective corporate reporting: Effective corporate reporting can be key to building alignment and understanding, but investors say current ESG information does not meet their requirements and expectations.
Understanding expectations: To close this gap, the study suggests companies need to build a better understanding of long-term investors' sustainability expectations and earn their trust by defining the finance function's involvement in ESG disclosures.