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Alternative Market Briefing

74% of institutional investors may divest from companies with poor environmental track records

Tuesday, November 30, 2021

Laxman Pai, Opalesque Asia:

A growing number of institutional investors in Canada and around the world are placing greater emphasis on environmental, social and governance (ESG) performance in their decision-making, said a study.

According to the 2021 EY Global Institutional Investor Survey, most investors (74%) indicated they are more likely to divest from companies with poor ESG track records, but concrete action is still lacking despite the urgent need for better quality disclosure from companies.

The race is on to get to net-zero and decarbonization through emissions reduction, carbon sequestration, and offsetting programs. The report shows that 86% will invest in companies that have an aggressive carbon footprint reduction or a low carbon footprint.

A further 90% of investors now attach greater importance to ESG performance in their decision-making than they did before the COVID-19 pandemic, and 92% say they have made decisions over the past 12 months based on the potential benefits of a "green recovery".

And yet despite the sharpened focus on ESG performance, less than half have taken action to update their investment policies and frameworks (49%) or revamp risk management strategies (44%).

In addition, as organizations look for new ways to provide the long-term value insights that stakeholders seek, a lack of regulation has investors concerned about the quality and transparency of ESG reporting from companies they're considering. ......................

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