Room for improvement on ESG reporting
Australian listed companies need to up their game when it comes to reporting sustainability factors with investors focusing on environmental, social and governance (ESG) risks when investing.
Despite the rise of ESG investing, Financial Services Council (FSC) chief executive, Sally Loane, said 13 per cent of S&P/ASX200-listed firms did not provide "meaningful information on sustainability factors" when issuing reports, with a further 17 per cent providing basic information.
Loane said the FSC in partnership with the Australian Council of Superannuation Investors (ACSI) had developed an ESG report guide, to help listed businesses to disclose any ESG risk factors in a consistent way to enable investment managers and investors make more informed decisions.
"Shareholders and analysts are increasingly focusing on ESG reporting to gauge companies' performance beyond traditional financial data," she said.
"As our $2.6 trillion funds management industry continues to grow — underpinned by $2 trillion in superannuation — investment managers are increasing their level of scrutiny on ESG risks as a risk management process and a measure of a company's value.
"This is an important governance measure that will benefit consumers in the long-term."
The FSC/ACSI ESG reporting guide for Australian companies 2015, said "appropriate management of ESG issues continues to be an essential ingredient for the establishment of long-term sustainable returns".
"The Global Financial Crisis, along with a number of recent individual company environmental and social events, have once again reminded investors that investment considerations cover a broad range of risks and opportunities that affect the value of companies.
"Research into corporate reporting practices shows that over a third of the S&P/ASX200 fail to provide meaningful information on ESG considerations. One of the aims of this Guide is to assist these companies in beginning to report meaningful ESG data."
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