Twenty-four institutional investors led by Aviva Investors have written to 30 of the worlds largest stock exchanges asking that they address inadequate sustainability reporting by companies.
The letter is part of a broader collaborative engagement initiative that was launched by Aviva Investors and facilitated by the UN-backed Principles for Responsible Investment PRI in 2008. It aims to encourage stock exchanges to consider how to improve the quality of sustainability reporting by the companies that list on their exchange.** Developed using Bloomberg data, the letter also ranks individual listing authorities on a sustainability league table that assesses the current level of environmental social and governance (ESG) disclosure among listed companies.
Exchanges where a large number of companies are disclosing ESG data include: Euronext Paris, Tokyo Stock Exchange, Helsinki, Euronext Amsterdam, Euronext Lisbon and Borsa Italiana.
Exchanges with the least number of companies disclosing this data include: Australian Stock Exchange, NASDAQ GS, Korea Exchange, Santiago Stock Exchange, and Philippine Stock Exchange.
A suggestion particularly advocated by Aviva Investors is a listing requirement for companies to consider how responsible and sustainable their business model is, and put a forward-looking sustainability strategy to the vote at their AGM.
Paul Abberley, CEO of Aviva Investors London, said:
Markets are driven by information. A lack of information as a result of limited or non-disclosure of ESG data makes it difficult for long-term investors such as us to assess the wider ESG risks and opportunities associated with a company. We believe that stock exchanges can play a crucial role in helping to create more sustainable global capital markets because of their ability to directly influence and monitor the operations and strategy of companies seeking to access the equity markets. This can only be a good thing for investors.
Georg Kell, Executive Director, UN Global Compact, a key supporter of the initiative, said:
Many global companies understand that long-term shareholder value is enhanced by both embedding sustainability into their long-term strategy and by disclosing fully their progress. Only when investors have business-relevant information at their fingertips, will they be able to assess one company relative to its peers and allocate capital accordingly. Stock exchanges now have a significant role to play in taking obvious and important next steps to create truly sustainable capital markets.
James Zhan, Director Division on Investment and Enterprise, UNCTAD, the organiser of last years sustainable stock exchange event at the UNCTAD World Investment Forum, said:
Good quality ESG reporting among large companies is not uncommon, but the information being reported lacks comparability and usefulness. This investor initiative demonstrates the strong market demand for standardized ESG reporting and greater attention to sustainable development. Stock exchanges can play an important role in mainstreaming best practices nationally, and contributing to international efforts to harmonize ESG disclosure.