The impact of Social Environmental Governance disclosure for investors: closing thegappresentatio

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How do investors use environmental social governance information? What investor led initiatives exist? What are the barriers? What are the trends in reporting?

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The impact of Social Environmental Governance disclosure for investors: closing thegappresentatio

  1. 1. Closing the Gap- theimpact of ESGdisclosure oninvestment decisions10.05.2011
  2. 2. “Setting standards for sustainability”Risk assessment/due diligenceManagement strategiesSustainable events management systemsEnvironmental complianceStrategic sustainability &CSR adviceResearch & training
  3. 3. Introduction• Shifting global and environmental landscape• Business no longer just turn a profit• Operate responsible, ethical• Also reflected by mainstream institutionalinvestors beginning to incorporatemainstream
  4. 4. Rise of ESG• What is Environmental Social Governance(ESG) ?• Key is managing environmental, socialimpacts, risks, performance and opportunity• Growth of sustainability reporting• Examples of ‘intangible indicators’-reputation, competitive advantage and riskavoidance
  5. 5. Investor led initiatives• United Nations Environment Programme FinanceInitiative (UNEP FI)• UN PRI• ICGNCeres• Extractive Industries Transparency initiative (EITI)• IFAC• Equator principles
  6. 6. Trends in reporting• Public reporting improves impact of businessactivity• Vehicle greater transparency, accountability,building trust• Environmental concerns –one factor• Regulation not main driver• Influence of networked world ( twitter,Linkedin)
  7. 7. Traditional reporting• Traditional reporting too narrow• New reporting requirements:– Created though law, standards, codes– Developments fragmented– Lack of universal format– Quality of information varied• Reporting landscape cluttered and confused• Evidence existing regulatory disclosures don’tmeet investors needs
  8. 8. Why report ?• Helps deliver broader business goals• Increasing awareness of supply chain risks• Driven by a variety of reasons• Since 1990s investors started attachingimportance to environmental information
  9. 9. Developments in EU reporting• New definitions and agenda for CSR• Intends to improve company disclosure orsocial and environmental information•
  10. 10. Reporting requirements in UK• UK Companies Act 2006• Climate Change Act• Narrative reporting changes• Key performance indicators
  11. 11. Accounting standards• Role of International Financial ReportingStandards• UK Generally Accepted Accounting Principles(GAAP)• Influenced by strength of regulatory regime• Example IAS Presentation Of Financialstatements
  12. 12. Stock Exchange disclosure rules• Stock exchanges globally implementingsustainability initiatives• Stock exchanges France, Denmark, Holland, SouthAfrica require reporting non-financial dimensions• UK Listing Authority no plans to introduceenvironmental reporting beyond requirementsfor Business reviews
  13. 13. Integrated reporting• Companies increasingly combining non-financial aspects into their Annual report andaccounts• IIRC initiative• Aim to support investor needs
  14. 14. How investors use ESG• Inform risk and return potential• Evaluate management quality• Engage with companies• Develop customized investment products• Assess asset managers
  15. 15. How to close the disclosure gap• Format standardizations• Comparability• Availability• Timeliness• Reliability• Analysis
  16. 16. What investors must do• Build knowledge and expertise on ESG• Systematically integrate ESG• Proactively ask companies about managementof material ESG• Use UNEP FI and PRI as platforms for dialogue
  17. 17. Conclusions• Growth in reporting will continue to drivechange• ESG data more accessible as disclosureincreases• Lot more needs to be done
  18. 18. www.clt-envirolaw.com

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