New York— A coalition of investors from 13 different countries is calling on 86 major companies for enhanced corporate reporting on environmental, social, and governance (ESG) activities, according to a press release issued by the United Nations Principles for Responsible Investment (UN PRI) last week. The lack of appropriate reporting from corporations presents an important opportunity for independent firms offering ESG research to investors.
The coalition of global investors, managing over US $2.1 trillion of assets, believes that ESG issues affect the performance of investment portfolios. These investors subscribe to the UN PRI, six principles geared toward responsible investment, and take into account ESG issues in their investment activities. Therefore, corporate reporting, as well as independent ESG research, is vital to these professionals.
Corporate failure to comply with reporting requirements
Each one of the 86 companies addressed by the investor coalition voluntarily joined the UN Global Compact, a global corporate responsibility initiative that requires its members to issue annual reports indicating their compliance with the UN sustainability framework. The 86 companies called on by the investor coalition have failed to honor the annual reporting requirements they accepted when joining the initiative.
The UN PRI has not disclosed the names of the 86 non-reporting companies, but it hopes that the investors’ call will motivate them to submit their reports. Last year, the investor coalition “named and shamed” 105 incompliant companies, resulting in appropriate reporting from 50 out of the 105 companies called upon.
Corporate reporting on ESG – an opportunity for independent research providers
The investor coalition fears that companies are increasingly subscribing to the UN Global Compact as a standard of good ESG practice, but are failing to fulfill the main goals of the initiative. Independent research covering ESG issues can address this issue twofold: On the one hand, indies can offer coverage on non-reporting companies. On the other hand, independent research can corroborate the accuracy of the statements submitted by reporting companies.
Integrity Research has reported on the significant developments in the ESG research space. Consolidation is the trend, and further changes can be expected – for example, who will buy Riskmetrics?. Among all these movements in the research industry, one thing is certain at this point: ESG issues and research continues to gain visibility among regulators (such as the SEC), corporations, and global investors. Local and international regulations tend to make it a necessary tool and investors will benefit from enhanced independent ESG coverage.