EY just released its 2024 Institutional Investor Survey, for which it surveyed 350 investment decision-makers from institutions around the world, including asset management firms, wealth management firms, insurers and pension funds. The findings highlight a significant gap between what investors say and do when it comes to considering sustainability. 

Key findings from the survey include:

• While 88% of investors surveyed have either substantially or somewhat increased their use of Environmental, Social, and Governance information over the past year, 92% agree that the risk to near-term performance outweighs the long-term benefits of many ESG-related investments and initiatives. 
• Despite the rise of sustainability reporting, 66% of investors say their institution is likely to decrease its consideration of ESG in decision-making.
• Nearly two-thirds (63%) of the investors surveyed anticipate that shifts in the business cycle—including periods of slower economic growth and recession—is the No. 1 factor that will most acutely or substantially affect their investment strategy over the next two years. According to the survey, investors are most likely to monitor trade restrictions and tariffs (62%), cost of capital (53%), and labor cost and availability (50%). 
• While economic concerns appear to be the primary focus of investors surveyed, 55% of the investors indicate that the impact of climate change will acutely or substantially affect their investment strategies in the near-term (the second-most cited factor behind shifts in the business cycle). This was particularly true for European and North American investors.
• The potential reasons given for investor focus on short-term results over long-term sustainability include a perception that sufficient diversification at the portfolio level may shield them from sustainability risks. According to the report, investors also argue that there is a lack of historical correlation between sustainability objectives and financial performance, which makes it hard for them to evaluate sustainable investment, due in part to a lack of high-quality disclosures and data. 
• According to the survey, over a third of investors (36%) are dissatisfied with the progress made by companies in delivering new nonfinancial performance reporting, and investors are most disappointed in the materiality, comparability, and accuracy of sustainability data. Four out of five investors surveyed (80%) believe that the materiality and comparability of sustainability reporting need improvement, with 62% saying the same for accuracy. 
• Some 85% of investors say that greenwashing is a greater problem than five years ago. Yet despite their lack of confidence in the ESG information being provided to them, 93% of investors surveyed say they are confident that companies will meet their sustainability and decarbonization targets (this is despite EY research that suggests that companies are actually struggling to meet their goals).
• Investors surveyed have mixed views on the likely usefulness of the European Union’s Corporate Sustainability Reporting Directive (CSRD) and ISSB standards. Among investors, there is a perception that while both ISSB and ESRS (the reporting standards comprising the CSRD) are suited to support long-term investment decision-making (which is what they are designed for), they are far less suited to support short-term investment decision-making. Less than a third (29%) of investors think the ESRS reporting standards are sufficiently detailed and complete for investment decision-making, while 22% say the same of the ISSB standards.