VW: Time to overhaul governance

Investors want to see better governance in German carmaker Volkswagen (VOW3-DE) following the diesel emissions scandal, according to Arndt Ellinghorst, head of global automotive research at Evercore.

"We did a survey asking auto investors what do you want to see from Volkswagen," Ellinghorst told CNBC's Worldwide Exchange. "People want to see change, they want to see much improved corporate governance within the company and there number one priority for the new CEO is to fix this massive scandal.

According to Ellinghorst, 60 percent of the investors surveyed said that Volkswagen was uninvestable and expected it to remain so for six months.

The findings come as Hans Dieter Poetsch, who is expected to be named VW chairman, told managers that the diesel scandal poses "an existence-threatening crisis for the company," according to reports in USA Today.

Volkswagen has come under fire after it was revealed the company had installed so-called "defeat devices" in some of their vehicles in order to cheat on emission tests. The company's previous CEO, Martin Winterkorn, had to step down because of the scandal.

Ellinghorst's findings are reflected in a survey of 100 institutional investors published this week by Hermes Investment Management.

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The survey, called "Responsible Capitalism and our Society", showed that awareness of environmental, social and governance issues had risen. For instance, 90 percent of investors thought fund managers should factor in corporate governance risks as well as financial metrics when making investment decisions.

Also, 79 percent of respondents thought governance risks were a sufficient reason to reject an investment.

However, the report also found that investors still made decisions based on short-term considerations.

"The industry's obsessive focus on measurement leads naturally to more short-term thinking and decisions that often miss the whole point of investment. This is to the detriment of the savers the industry is supposed to be serving," wrote Saker Nusseibeh, chief executive of Hermes, in a press release.

"47 percent of respondents continue to believe pension funds should focus exclusively on maximising retirement incomes rather than giving greater consideration to whether their current investments will improve or detract from the overall quality of life experienced by beneficiaries when they retire", she added.

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Clarification - This article was updated since first published to include updated statistics from Hermes Investment Management.