Four in five investors consider sustainability issues – PwC survey

Four in five investors have looked at sustainability issues in one or more investment contexts in the last year, according to research from PwC. However, investors also cited dissatisfaction with current reporting standards.

PwC asked investors representing over $7.6 trillion (£4.5tn) in assets under management, including asset managers and pension funds, about a range of sustainability issues, including climate change, resource scarcity and corporate social responsibility.

The study found that investors are most likely to care about sustainability issues during shareholder-corporate engagement, proxy voting and when looking at their investment strategy, with over half those questioned having incorporated some areas of sustainability into their strategy. The interest in sustainability issues was particularly evident when investors were looking at issues involving corporate social responsibility and good citizenship.

The biggest driver behind considering sustainability issues was to mitigate risk, with 73% highlighting this as a reason. Failing to consider sustainability can have a negative impact on investors in the long term. For example, investing in a carbon intensive business at a time when the world is trying to cut emissions and bringing in regulation to do so, could result in lower returns and higher risk in the future.

Encouragingly, over half actively wanted to avoid firms with unethical practices and acknowledged that doing so could enhance performance. Some have argued that sustainable investment means performance sacrifice but in recent years this myth has been withering away, as more evidence against it has emerged.

Despite the growing interest in sustainable investment, investors are finding a lack of common standards frustrating and this is putting some of them off. Globally there is a high level of dissatisfaction around the sustainability-related information being provided by companies, with Europe being the only region were more investors were satisfied than dissatisfied.

The report states, “The lack of common standards to assess the materiality of environmental or social issues may be affecting investors’ ability to consider these issues as they want. Two-thirds of investors responding to our survey say that they would be more likely to consider this type of information when making investment decisions if common standards were used.”

This dissatisfaction is demonstrated in investors strongly supporting that companies should periodically assess multiple types of risk. Over 90% of respondents backed labour rights, human health and climate change in regards to regulatory risk being regularly assessed.
Even for the issue that received the lowest support – other social issues, such as increasing income inequality – periodical assessment was supported by 74% of participants.

Looking to the future, investors believe an increasing importance will be placed on sustainability issues and this is reflected in the fact that more and more investors want to engage directly with the companies on the challenges.

Over the next 12 months, 89% of investors that identified sustainability issues as relevant indicated they would request information from a company. Additionally, two-thirds are likely to seek a meeting with the companies’ boards or management, suggesting that investors are taking the issues around sustainability more seriously and want their portfolio to reflect this.

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Invest Malaysia - PM Najib announces liberalisations

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KUALA LUMPUR: Datuk Seri Najib Tun Razak has announced new liberalisation measures to further promote investments in a broader spectrum of assets.

The Prime Minister said one of the measures was the removal of the mandatory requirement for credit ratings effective Jan 1, 2017.

He said a gradual approach was being adopted to provide industry players sufficient time to further refine mechanisms necessary to operate under the new regime.

"From Jan 1 next year, flexibilities will be accorded with regards to credit ratings and the tradability of unrated bonds and sukuk," he said in his keynote address at Invest Malaysia 2014 on Monday.

The Prime Minister also announced that the equity shareholding for credit rating agencies would be liberalised.

International Credit rating agencies with full foreign ownership will be allowed in the Malaysian market from Jan 1, 2017, he added.

"The entry of international agencies will further enhance the quality and standard of rating services, introduce a more competitive fee structure and widen both expertise and the range of credit rating services on offer," Najib said.