The continuing trend of ASX listed companies providing greater ESG disclosure to investors is being assisted by a new reporting guide published by the Financial Services Council (FSC) and the Australian Council of Superannuation Investors (ACSI).
In 2009 only 17 companies in the ASX200 were providing a leading level of ESG disclosure, while 15 were providing none at all, according to Paul Murphy, executive manager of institutional investment and policy at ACSI.
“In 2015, which is the most recent data we have, there were 45 leading companies and only three we would call laggards,” Murphy said. “If there is a lack of reliable comparable disclosure of corporate performance beyond traditional financial reporting, this can undermine the way boards communicate to investors in both long-term and short-term measures of business success.”
Recommendation 7.4 in the ASX Corporate Governance Council Principals and Recommendations (3rd edition) explicitly requires that “a listed entity should disclose whether it has any material economic, environmental and social sustainability risks and, if it does, how it manages or it intends to manage those risks”.
This is in keeping with global best practice with 15 stock exchanges providing guidance on ESG disclosure, and a further 13 having made clear commitments to do the same by the end of this calendar year.
However, 13 per cent of ASX200 companies are currently failing to provide meaningful information on sustainability factors and a further 17 per cent provide only basic information.
According to Sally Loane, chief executive of the FSC, the guide was developed to help companies understand ESG reporting and risk disclosure and why it’s critical for investors.
“And we believe there was a gap in the reporting frameworks for Australian companies, particularly from the point of view of what an intuitional investor would want to see,” Loane said.
“This guide is not intended to replace any of those. It’s mainly intended as a guide to increase transparency and assist companies and investment managers here in Australia.”
Kevin Lewis, chief compliance officer at the Australian Securities Exchange said that as an ASX200 listed entity, the ASX itself will benchmark its ESG disclosures against the publication.
“I would like to commend it to you as a very helpful and thoughtful contribution to the area of sustainability reporting.”