Global investors urge Irish firms to scale AI and cut emissions

The pressure is on for companies to turn AI investment into impact, according to PwC’s latest Global Investor Survey. 59% of global investors who invest in or cover Irish companies urge Irish firms to deploy AI solutions at scale (Global: 73%). Global investors believe Generative AI (GenAI) will result in greater productivity increases (79%) for the Irish companies they invest in over the coming 12 months, much higher than global investors in global firms (66%). However, investors in Irish companies believe that revenue and profitability increases (Ireland: 38% and 44% respectively) from GenAI will be less than what they expect for global companies (Global: 63% and 62% respectively).

Just 28% of investors in Irish companies see opportunities from implementing AI across a wide range of areas including scalability, measuring return on investment and workforce impact, but global investors see greater opportunities in the global firms in which they invest (42%).

Mixed views on the impact of GenAI on headcount

Global investors in Irish firms have mixed views on the impact that GenAI will have on headcount in the next 12 months. For example, 56% believe that GenAI will either increase headcount or there will be no change in headcount (Global: 64%). At the same time, 41% of global investors in Irish companies expect GenAI to decrease headcount in those organisations (Global: 32%). 78% of respondents urge the Irish businesses they invest in to upskill their workforce (Global: 74%).

The survey finds that investors see technological disruption as the most significant driver of business model change for the businesses they invest in (Ireland: 82%; Global: 71%), ahead of government regulation (Ireland: 63%; Global: 64%), changes in customer preferences (Ireland: 53%; Global: 61%) and supply chain instability (Ireland: 66%; Global: 60%).

David Lee, Chief Technology Officer at PwC Ireland, said: “Investors are calling for Irish firms to deploy AI solutions at scale. The survey highlights that global investors in Irish firms expect to see greater productivity gains from GenAI compared to global counterparts investing in global companies. However, more global investors in global firms see opportunities from implementing AI across a wide range of areas than in Irish firms.”

“Investors highlight that business leaders recognise that achieving widescale benefits from AI and GenAI will take investment in people and upskilling, as well as in technology. Management can expect scrutiny on the wider opportunities from AI and GenAI and how these are delivered. Positive outcomes will only be delivered if the environment around AI and GenAI is sensible, safe and secure with proper governance structures.”

Investors look beyond financial statements, but fewer investors in Irish companies can rely on GenAI to analyse published information

As investors look to qualitative data, AI may provide significant opportunities in analysing information published by companies. However, fewer investors in Irish companies can rely on GenAI to analyse published information compared to global counterparts: less than half (47%) of global investors in Irish companies report that GenAI has significantly or moderately increased their ability to analyse published information produced by those companies (Global: 62%).

Investors value a wide range of data beyond financial information, particularly around corporate governance (Ireland: 50%; Global: 40%), people management (Ireland: 50%; Global: 37%) and innovation (Ireland: 44%; Global: 37%). Most investors also report relying to a large or very large extent on multiple sources of information, including investor-focused communications (Ireland: 72%; Global: 61%). Over half rely on direct dialogue with the company (Ireland: 53%; Global: 57%). Still, a large proportion of global investors in Irish companies rely on financial statements and note disclosures to a large or very large extent (Ireland: 69%; Global: 55%).

Mary Ruane, Asset and Wealth Management Leader at PwC Ireland, concluded: “Reliable information is the lifeblood of capital markets, yet today’s pervasive flow of data can be a blessing and a curse. To be on a par with global firms, Irish companies need to do more to ensure investors can rely on GenAI to analyse their published information. The expectation from business leaders is to communicate to investors what is material to their business, doubling down on transparency and consistency to ensure they are building trust through communication. As AI provides the capability needed to sift easier through these qualitative and quantitative data, ensuring consistent and effective communication from company leaders is imperative.”

Investors call for greater investment in carbon emissions reduction

Investors continue to prioritise action on the impact of climate in the businesses in which they invest. 84% of global investors in Irish companies expect the companies they invest in will be exposed to threats from climate change within the next 12 months (Global: 85%). At the same time, 63% of global investors urge Irish companies to step-up their investment to reduce carbon emissions (Global: 64%).

Three-quarters (75%) of survey respondents agreed that they would significantly or moderately increase their investment in companies that are taking a range of climate-related actions, with the greatest support for taking action to build sustainable supply chains (80%). When assessing companies’ net zero transition plans, global investors in Irish companies say governance (Ireland: 63%; Global: 72%) and associated capital or operating expenditures are extremely or very important (Ireland: 59%; Global: 68%). Additionally, 82% of global investors in Irish companies say firms should incorporate ESG/sustainability directly into their corporate strategies (Global: 71%).

Majority say reporting on sustainability performance is based on unsupported claims

However, challenges remain with 75% of global investors in Irish companies agreed that corporate reporting about the company’s sustainability performance contains unsupported claims to at least a moderate extent (Global: 80%), marking little change over the past two years. Not surprisingly, 69% of global investors in Irish companies demand a level of detail in assurance reports on sustainability information that is comparable to that of financial audits (Global: 73%). 60% said that the inclusion of sustainability targets in executive pay would give them confidence in assessing a company’s sustainability reporting (Global: 82%).

The benefits of sustainability reporting are seen to a lesser extent in Ireland. On average less than half (44%) of investors in Irish companies see the benefits of sustainability reporting to a large or very large extent across a range of areas (Global: 57%). The most important benefits in Ireland are improved stakeholder engagement, competitive advantage and risk mitigation.

Fidelma Boyce, Assurance Partner at PwC Ireland, said: “Investors continue to prioritise action on the impact of climate. They are increasingly interested in the governance and financial impact and commitment of companies’ net zero transition plans. Companies should embed sustainability in their strategies, particularly as investors continue to look at sustainability-related disclosures and communication to assess action.”

Ability to manage a crisis important to investing

More than nine in ten (94%) global investors in Irish companies agree that the ability of a company to manage through a crisis is an important factor in their investment decision-making (Global: 86%). 66% of investors believe that it is also extremely or very important that Irish companies re-think their business models in response to supply chain instability (Global: 60%) — and 59% say they should increase their investment to de-risk them (Global: 68%).