Investors see a greater climate change threat than CEOs
When we asked how exposed companies will be to financial losses due to climate change over the next 12 months and five years, fewer Asia Pacific CEOs see climate change as urgent to their business, compared to investors. The data shows that indeed, across the short and medium time horizons, significantly more investors (than CEOs) anticipate that climate change will impact companies’ financial performance.
It is possible that some disparities between CEO and investor outlooks on climate change reflect the relative urgency of other threats which CEOs face. Among the many other competing threats include inflation and macroeconomic volatility, which are taking precedence over climate responses.
CEOs are concerned with many competing threats
CEO climate action trails investor expectations
The data also reveals that Asia Pacific CEO climate action trails investor expectations. Five measures which investors consider effective are also those that are adopted by CEOs, but the gap between expectations from investors and implementation by CEOs is wider in some areas: for example, developing a data-driven climate strategy, implementing initiatives to manage physical climate impacts and adopting an internal carbon price.
CEO climate action trails investor expectation
CEOs are implementing measures which investors consider effective, however there is a gap between expectations and implementation for some action areas.
Sustainability reporting not measuring up
PwC’s research also reveals few investors have confidence in the sustainability reports and company disclosures. From the survey of investors investing in Asia Pacific, 87% think corporate reporting contains unsupported sustainability claims - contains at least some greenwashing - and seek greater transparency on the economic impact of companies’ sustainability agendas as well as the alignment of today’s ESG investment with the long-term viability of the company.
Our survey indicates that 75% of investors trust information more if it is audited by an independent assurance provider with the same level of rigor as in financial statements, known as reasonable assurance. However, limited assurance only gives investors slightly higher levels of confidence than an internal review.
Source: PwC Global Investor Survey 2022
Profitability key for investors; CEOs acknowledge future viability requires change
Profitability remains critical for investors investing in Asia Pacific, with nearly nine out of ten (85%) saying they would accept no more than a one percentage point reduction in overall returns for companies in their portfolios that take sustainability actions relevant to their business. Meanwhile, CEOs acknowledge that achieving profitability against the backdrop of the global economy is a challenge.
Our findings show that in 2023, 69% of Asia Pacific CEOs believe global economic growth will decline, compared to last year when 76% felt growth would improve. The data also reveals that 53% of CEOs in Asia Pacific believe their current business models will not survive within the next decade, whether due to changing consumer demands, regulatory development, labour shortages, technology or supply chain disruption. This is clear acknowledgement of the need to adjust.
How CEOs can deliver on ESG in tough times
Sustainability is key to linking climate action with value creation
PwC’s surveys suggest that CEOs can benefit by connecting their company’s climate strategy with what the investors care about most—profitability and innovation—and making the case for climate action regarding value creation.
Sustainability is key, it is no longer a nice to have. CEOs must look at sustainability concurrent with other business priorities. At a time when competition for talent, customers and investors has rarely been more intense, sustainability can be a differentiating credential to help CEOs attract all three.
It is difficult to ignore the significance of sustainability performance in improving customer loyalty, regulatory compliance, access to talent and finance, curbing energy costs and shoring up supply chains. The progress CEOs make on sustainability now will determine how well your business can adapt to the recovery ahead.
Authors
Contact us
Andrew Chan
Asia Pacific Sustainability, Strategy, Transformation, Clients & Markets, Partner, PwC Malaysia
Tel: +60 3-2173 0348
Asia Pacific Sustainability, Climate Change, Partner, PwC China
Tel: +852 2289 3680