Most Canadian investors say companies cannot be trusted to hit their environmental, sustainability and governance (ESG) goals. That's among the findings of a new survey highlighting significant doubts about the trendy investment theme.
The 2021 Trust Barometer report from American public relations firm Edelman found 77 per cent of Canadian respondents feel companies "frequently overstate or exaggerate their ESG progress." Diversity, greenhouse gas emissions, and executive-worker wage gaps were the top areas where respondents say they distrust publicly disclosed information.
Edelman says it gathered results from 700 institutional investors from seven countries between Aug. 11 and Sept. 3, 100 of which were Canadian.
The findings paint a grim picture of trust in ESG accountability as a growing number of retail and institutional investors weigh factors beyond financial performance.
According to a report in July from the Global Sustainable Investment Alliance, sustainable investment assets grew to US$35.3 trillion globally last year amid mounting concerns about societal inequities and climate change.
Most, or 72 per cent of the respondents to the Edelman survey in Canada and globally, say they don't trust companies to achieve their stated ESG commitments. In Canada, 82 per cent say they expect litigation resulting from such company failures. That figure rose to 94 per cent in the U.S.
Beyond those concerns, critics say the ESG acronym lacks precision, and simply lumps three good things into one easy-to-spout buzz term used to justify higher fees on financial products.
"In terms of an investment thesis, I find it very foggy," Tom Rand, author of the book Climate Capitalism, told Yahoo Finance Canada's Editor's Edition on Tuesday.
"Those are three very separate categories," he added. "It means that companies can have really good governance, have a 50-50 gender split on your board, have people that don't look like me in positions of power... and now you've checked your ESG box, but your emissions doubled. I think it's confusing."
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.