When the conversations around environmental, social and governance (ESG) considerations as part of investment decision making started in the early 2000s, these issues were broad, intangible and subjective. The problem with intangible and subjective topics is that it is difficult to measure and report.
In the words of the mathematician Karl Pearson; “That which is measured improves. That which is measured and reported improves exponentially.” This means that if we were to see any improvement in ESG metrics, we must not just measure but also report ESG metrics.
The first sustainability reporting framework was developed in 1997 by the Global Reporting Initiative (GRI) and followed since by the CDP, CDSB, IIRC, SASB and TCFD. All with the goal to assist companies to accurately disclose their ESG metrics. Yet, many investors still state ‘greenwashing’ as a problem or even deterrent, due to the lack of quality data and consistent reporting. Some even refer to measuring the entire fruit basket from apples to pears.
It was with great elation that five global organisations — CDP, CDSB, GRI, IIRC and SASB — recently announced a shared vision for a comprehensive corporate reporting system and their commitment to collaborate to achieve this vision.
This does not necessarily mean that all financial statements should look the same, or that all ESG ratings should give the same answer. It does however mean that investors should be able to rely on data in annual reports and ESG reports to base their investment analysis on, and unlock ESG alpha.”
Contact Sanne if you require our expert team to advise on various ESG ratings, benchmarks, metrics and reporting services available. We would be delighted to speak with you to discuss how Sanne can assist. For more information please contact Karlien De Bruin directly.