Most institutional investors believe companies often overstate their progress in environmental, social and governance efforts and do not believe the companies will achieve their goals, said a survey released by Edelman Wednesday.
Results of the fifth annual Edelman Trust Barometer Special Report: Institutional Investors show 82% of the global institutional investors surveyed in August and September believe companies either overstate or exaggerate their ESG progress, and 72% do not believe those companies will ever achieve their stated commitments in ESG or diversity, equity and inclusion.
Meanwhile, 87% of respondents predict there will be more litigation coming as a result of companies breaking their ESG promises.
"Investor priorities and expectations are changing rapidly and companies that do not keep up will struggle to win trust," said Lex Suvanto, managing partner and CEO of Edelman's financial communications division, in a news release announcing survey results.
"Our research reveals that investors do not trust company ESG disclosures and do not trust companies to deliver on ESG promises," Mr. Suvanto said.
The survey said 84% of respondents are actively on the lookout for companies that do not deliver on their ESG promises and disclosures.
"At the same time, investors now see employee activism as a sign of a healthy corporate culture," Mr. Suvanto said. "These are disruptive forces across the investment community that corporate boards and leaders must embrace to ensure competitive cost of capital and fair valuations."
Ninety-five percent of respondents say they are more interested in taking an activist approach to investing.
When asked whether a workplace culture that fosters employee empowerment is important for building investor trust in companies in which they invest, 85% said it was either extremely important or somewhat/very important. Seventy-four percent of respondents said employee activism gives a clear signal of a healthy culture, and 71% agreed that boards of directors should be accountable for that healthy culture.
Edelman surveyed 700 chief investment officers, portfolio managers and buy-side analysts in the U.S., U.K., Canada, Germany, Japan, the Netherlands and the Middle East representing about $6.75 trillion in assets under management.
The report is available on Edelman's website.
