Investors Reviewing Sustainability Reports

Sustainability Reporting: Are You Disclosing What Really Matters to Your Investors?

October 17th, 2018

When it comes to corporate sustainability reporting and disclosure, sustainability leaders are facing increasing pressure from investors to provide meaningful information to guide the decision-making process. But as the pressure mounts, the question is: Are you disclosing what matters to your investor stakeholders? A recent report from Ceres suggests many companies may be missing the mark.

Assessing the Current Landscape

Concerns over social and environmental risks are driving investor decision making. According to Ceres, in 2016, responsible investment accounted for 26%, or $22.89 trillion, of all professionally managed assets globally—a whopping 25% increase from 2014.

“As markets fluctuate in response to the unpredictability of water risks, climate change-driven natural disasters and human rights concerns, investors look to corporate disclosures to inform them of how companies are navigating these changes,” the report states. “Investors need decision-useful information on how companies are ‘walking the talk’ on these issues.”

The report analyzed how well the 476 largest companies of the Forbes Global 2000 disclose and perform on five key indicators that are highly valued by today’s investors. The results? There are some major gaps that need to be filled.

“At a time when investors need reliable, financially relevant, material corporate disclosures on sustainability, companies are leaving gaps between what investors demand and what they provide,” Ceres states in the report. “Global companies are beginning to provide decision-useful sustainability disclosures, but the maturity of their disclosure systems and the rigor of these disclosures are still evolving.”

What Investors Want

So, what information do investors really want? Ceres identifies five common items on investor wish lists:

  1. Disclosures are mapped to widely-used, market-tested sustainability disclosure standards. This gives investors access to consistent, year-over-year information that can be used in peer comparisons.
     
  2. Details surrounding corporate boards’ oversight of sustainability. Since boards are bound by fiduciary duty to shareholders, disclosing details of the board’s role demonstrates a company’s commitment to sustainability as a business priority.
     
  3. A robust materiality assessment. By focusing on materiality and disclosing those details, investors can gauge how important sustainability issues are to the business and how they inform the overall strategy.
     
  4. Stakeholder engagement. Investors want to know a company is committed to understanding the concerns of outside constituencies, which can be seen as an important characteristic of proactive risk management.
     
  5. External assurance. Investors want to be sure that sustainability disclosures are obtained using rigorous and reliable systems, and external assurance helps build that confidence.

Finding Your Path

While Ceres categorizes maturity into three distinct phases, our own reporting experts focus more on whether client companies are following and advancing along the unique reporting path that’s right for them.

Successful disclosure comes out of intentionally and carefully considering which reporting framework (or frameworks) are the best fit for your organization, and creating a system that works for you. A materiality assessment is a key part of this process--investors and stakeholders want to know which topics matter most to a company, and a materiality assessment shows you understand take that seriously. Sharing the results of your assessment and following up by reporting on those material topics proves your organization is truly committed to sustainable practices and principles. This transparency then forms the base for stronger, deeper stakeholder engagement as your program matures.

With so many organizations at a reporting crossroads, it can be helpful to remember that the practice of sustainability reporting and disclosure is less than 30 years young and still evolving. By checking your own reporting and disclosure practices against investor needs and re-focusing your efforts on the business’s most important areas, you can get ahead of the curve and give investors what they really want.

Do you lack the bandwidth, expertise, or budget to make meaningful change? Learn how Antea Group’s corporate reporting and disclosure consultants can help.

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