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New study shows that investors are looking for more structure in ESG reporting
May 29, 2014
A recent survey conducted by Institutional Investor magazine on behalf of EY, shows that investors are struggling to find ways to meaningfully compare data, to understand which issues are most material to their sustainable growth and to draw quantifiable links between non-financial and financial performance.
“Tomorrow’s investment rules: global survey of institutional investors on non-financial performance” (availailable here) reveals that non-financial performance information played a pivotal role at least once in decision-making in the last 12 months for 89% of the 163 institutional investors surveyed. It also shows that investors in emerging markets (70%) are far more likely to use non-financial information in their investing decisions, compared to 49% in developed markets.
However, while non-financial performance was seen as providing a good benchmark for risk, identifying material issues, making peer-to-pear company comparisons, and a lack of connection between non-financial and financial performance are problem were difficult.
Recommendations emerging from this study reflect the strong momentum on the part of the investment community, standards setters, stock markets and NGOs towards developing a harmonized set of recommendations/guidelines and frameworks for sustainability (ESG) reporting.
With this in mind, they call for companies to keep abreast of international developments in the rapidly emerging are of ESG reporting such as the Global Reporting Initiative (GRI) Guidelines, the International Integrated Reporting Council’s (IIRC) Integrated Reporting Framework and the sustainable accounting standards released by the US based Sustainable Accounting Standards Board. Accordingly, understanding these areas, the report concludes, can be crucial for gaining a competitive advantage.