The document discusses the growing importance of Environmental, Social, and Governance (ESG) disclosures in investment decisions, noting a shift towards responsible and ethical business practices. It highlights trends in ESG reporting, the fragmentation of current reporting standards, and the regulatory frameworks that guide these disclosures. The report emphasizes the need for improved reporting standards to meet investor needs and to facilitate informed risk assessment and investment strategies.

1. Closing the Gap- the
impact of ESG
disclosure on
investment decisions
10.05.2011

2. “Setting standards for sustainability”
Risk assessment/due diligence
Management strategies
Sustainable events management systems
Environmental compliance
Strategic sustainability &CSR advice
Research & training

3. Introduction
• Shifting global and environmental landscape
• Business no longer just turn a profit
• Operate responsible, ethical
• Also reflected by mainstream institutional
investors beginning to incorporate
mainstream

4. Rise of ESG
• What is Environmental Social Governance
(ESG) ?
• Key is managing environmental, social
impacts, risks, performance and opportunity
• Growth of sustainability reporting
• Examples of ‘intangible indicators’-
reputation, competitive advantage and risk
avoidance

5. Investor led initiatives
• United Nations Environment Programme Finance
Initiative (UNEP FI)
• UN PRI
• ICGN
Ceres
• Extractive Industries Transparency initiative (EITI)
• IFAC
• Equator principles

6. Trends in reporting
• Public reporting improves impact of business
activity
• Vehicle greater transparency, accountability,
building trust
• Environmental concerns –one factor
• Regulation not main driver
• Influence of networked world ( twitter,
Linkedin)

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’t
meet investors needs

8. Why report ?
• Helps deliver broader business goals
• Increasing awareness of supply chain risks
• Driven by a variety of reasons
• Since 1990s investors started attaching
importance to environmental information

9. Developments in EU reporting
• New definitions and agenda for CSR
• Intends to improve company disclosure or
social and environmental information
•

10. Reporting requirements in UK
• UK Companies Act 2006
• Climate Change Act
• Narrative reporting changes
• Key performance indicators

11. Accounting standards
• Role of International Financial Reporting
Standards
• UK Generally Accepted Accounting Principles
(GAAP)
• Influenced by strength of regulatory regime
• Example IAS Presentation Of Financial
statements

12. Stock Exchange disclosure rules
• Stock exchanges globally implementing
sustainability initiatives
• Stock exchanges France, Denmark, Holland, South
Africa require reporting non-financial dimensions
• UK Listing Authority no plans to introduce
environmental reporting beyond requirements
for Business reviews

13. Integrated reporting
• Companies increasingly combining non-
financial aspects into their Annual report and
accounts
• IIRC initiative
• Aim to support investor needs

14. How investors use ESG
• Inform risk and return potential
• Evaluate management quality
• Engage with companies
• Develop customized investment products
• Assess asset managers

15. How to close the disclosure gap
• Format standardizations
• Comparability
• Availability
• Timeliness
• Reliability
• Analysis

16. What investors must do
• Build knowledge and expertise on ESG
• Systematically integrate ESG
• Proactively ask companies about management
of material ESG
• Use UNEP FI and PRI as platforms for dialogue

17. Conclusions
• Growth in reporting will continue to drive
change
• ESG data more accessible as disclosure
increases
• Lot more needs to be done

18. www.clt-envirolaw.com