Three Ways to Streamline ESG Reporting: Outcomes from WFE and GRI Roundtable
As environmental, social and governance (ESG) reporting establishes a stronghold across markets worldwide, the question is how and to what extent this information is effectively used by investors.
Bringing together companies, investors and exchanges from across the world, GRI and the World Federation of Exchanges (WFE) co-hosted a round-table discussion on 7 June in London. The aim of the session was to create a better understanding of how ESG reporting can be made more effective, in the light of the following challenges presented by the current reporting environment:
- Limited awareness of investor-relevant reporting: The investment community lacks a clear, industry-wide consensus on which ESG indicators are financially material, and how to incorporate these into their investment strategies.
- Reporting fatigue: This results from the proliferation of frameworks and questionnaires asking reporters for ever-increasing amounts of ESG information. These frameworks often overlap, leading to the same information being reported multiple times. Next to this, not all the reported information is of material relevance to the company and investors.
Sharing their views on these challenges, participating reporters, investors and exchanges indicated three ways to facilitate streamlined ESG reporting.
Greater engagement between investors and reporters
All participants agreed that ESG reporting needs to be streamlined so that the information being disclosed by reporters is effectively used by investors. What this requires first and foremost, is more direct engagement between investors and reporters, to determine which ESG criteria are material to both. While there are a few core issues, such as governance, which are relevant across all companies, the materiality of environmental and social factors is very dependent on company, sector and region. A path forward, as agreed by the participants, would be to replicate the successful format of this GRI and WFE session between investors and reporters with a regional and sector focus.
Report once, use several times
Companies bear the burden of reporting fatigue for fear of being penalized by the market for non-compliance through lower ratings and reduced investment. Addressing this challenge so that information reported once can be used several times is a crucial step towards streamlining ESG reporting.
As highlighted by GRI’s Chief Executive Tim Mohin, “To be effective, reporting needs to be concise, consistent, current, and comparable. With more streamlined reporting, information reported once can be used several times to comply with different frameworks or communicate with various audiences. We aim to empower reporters to provide high-quality, widely-trusted disclosures using the GRI Standards, which will not only reduce their reporting burden, but also ensure that their ESG information is meaningfully incorporated in investment decisions.”
Guidance on ESG frameworks
Both companies and investors still need greater awareness and better guidance on how to effectively use ESG reporting frameworks.
As intermediaries, exchanges see it as their role to advance awareness on the value of ESG reporting, and promote the sustainability agenda among investors and reporters. As explained by WFE’s Chief Executive Officer Nandini Sukumar, “Our members see the provision of fair and orderly markets as central to their mandate. In addition, they recognize the impact that ESG issues may have on corporate performance and investor returns, and potentially the health and vibrancy of markets overall.”
As the developer of the world’s most widely used sustainability reporting framework, GRI is committed to bridging this gap and further enabling investor-relevant ESG reporting. The WFE and GRI have identified potential action items based on the above points that emerged during the session, and will pursue these in the coming months.
Check out GRI and RobecoSAM’s research Defining What Matters (2016) to find out which topics companies are disclosing and whether it matches investors' needs.
