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A Bullish Future for ESG Disclosure on Global Stock Exchanges
By Michael Schweibinz

Stock exchanges around the world are beginning to respond to the demands of socially conscious investors and asset managers. ESG (environmental, social, governance) disclosure is still relatively new to stock exchanges, yet the future of ESG reporting looks promising.

ESG analysis is integrated into investment strategies around the world and stock exchanges are beginning to implement robust corporate education programs, sustainability-themed indexes, and even set standards for sustainability disclosure as a prerequisite for companies to list on the exchange.

Numerous countries, both in “developing economies (such as France and Sweden) and emerging markets (such as Malaysia), have introduced mandatory ESG or corporate responsibility (CR) reporting standards.” The Australian Stock Exchange (ASX) has perhaps the best ESG disclosure standards.

The Initiative for Better ESG Disclosure:

When an Exchange strengthens its ESG disclosure requirements, it tends to benefit from improved reputation and added protection. Investors find value in ESG disclosure reporting because they can more easily evaluate the companies on their risks and opportunities—ultimately leading to a more sound investment decision.

These benefits are precisely why the Experts in Responsible Investment Solutions (EIRIS) endorses the movement, and have several recommendations for stock exchanges:

·      Incorporate ESG disclosure requirements into listing rules and corporate governance standards.

·      Implement disclosure requirements on a ‘company or explain’ basis.

·      Support the requirement for a resolution on a CSR or sustainability report.

·      Explore measures to encourage best practice among companies (e.g. through sustainable indexes).

Investors utilizing ESG analysis have a more transparent and holistic view, and are able to determine if their money is going towards what they truly believe in. Consequently, stock exchanges will be better positioned to drive market efficiency—all while superior managed companies are rewarded.

To learn more about stock exchanges incorporating ESG disclosure requirements:

http://www.ceres.org/investor-network/incr/sustainable-stock-exchanges

http://www.eiris.org/files/research%20publications/StockExchanges&ESGNov09.pdf

 

Past performance is no guarantee of future results.

 

Posted: September 19, 2013