88% of institutional investors are more likely to invest in companies that integrate financial and ESG data.
Commissioned by reporting compliance platform, Workiva, the 2024 Executive Benchmark on Integrated Reporting examines current perspectives on Environmental, Social, and Governance (ESG) reporting among executives and investors.
Partnering with Ascend2, the Workiva survey included responses from 894 C-suite executives and vice presidents across finance and accounting, ESG and sustainability, internal audit, and legal departments. Additionally, 103 institutional investors from the United States, Canada, and Mexico were involved.
The results suggest that ESG investing is still considered a critical benchmark for investors, with 88% of institutional investors saying they are more likely to invest in companies which integrate financial and ESG data. Additionally, 82% of these investors reported no change in their investment decision-making processes despite recent US-based criticism of ESG.
The survey also indicated broader support for ESG integration, with the vast majority (91%) of executives surveyed agreeing that combining financial and ESG reporting provides a more comprehensive view of a company’s performance.
“Workiva’s Executive Benchmark on Integrated Reporting sheds light on many of the dynamic challenges and opportunities shaping the landscape of corporate reporting,” said Paul Druckman, member of Workiva’s ESG Advisory Council and chairman of the World Benchmarking Alliance.
“First and foremost, the survey underscores the prevailing sentiment among executives and institutional investors that integrated financial and ESG reporting is a fundamental necessity for providing stakeholders with a comprehensive understanding of a company’s performance.”
But despite the support for integrating financial and ESG data, the process of doing so remains challenging. According to executives, data collection ranks as the most significant hurdle to integrated reporting (52%) and business reporting (55%) in general.
Regulatory changes also present a challenge for businesses, with nearly half (48%) of respondents citing concerns. This concern is likely to grow, with almost three-quarters (74%) of executives anticipating increased difficulty complying with regulatory reporting requirements in the next year. This could impact their companies’ ability to meet compliance standards.
These findings coincide with the recent announcement of the US Securities and Exchange Commission’s (SEC) Climate Disclosure Rules. These rules aim to improve and standardise the disclosure of climate-related data and associated financial risks within companies’ annual reports and registration statements. The goal is to provide investors with consistent, comparable, and reliable information.
Whilst the new rules have been watered down slightly, removing the requirement for Scope 3 reporting entirely and reducing the reporting burden on smaller businesses, it continues to be a concern for many businesses, similar to those struggling with the Corporate Sustainability reporting Directive (CSRD) in the EU.
On a positive note, advancements in generative AI are considered a potential solution by many executives. The survey indicates that 83% of executives believe generative AI can assist companies in meeting regulatory requirements. This optimism aligns with the growing adoption of generative AI by institutional investors, with over half already using it to assess financial and ESG performance.
