Non-Financial Reporting Falls Short, Investors Say
Corporate non-financial reporting by European companies is not transparent or adequate enough for investors, according to a survey conducted by the European Sustainable Investment Forum and the Association of Chartered Certified Accountants.
The survey, which was completed by 94 analysts and investors from large mainstream to small specialist funds located across 18 countries, found 67 percent always made use of non-financial information, such as sustainability reports. Some 25 percent of respondents say they frequently use non-financial information and 8 percent sometimes use it, according to the survey.
As of 2011, assets managed incorporating non-financial information represented in excess of â‚¬10.5 trillion ($13.8 trillion) globally, of which almost two-thirds are managed by European investors, according to market studies by Eurosif and the Global Sustainable Investment Alliance.
Despite the growing reliance on corporate sustainability reporting, investors are unhappy with the quality of information contained in them, according to the survey. Some 93 percent of investors surveyed believe non-financial disclosure is insufficient to assess materiality.
The survey follows a European Commission proposal in April to establish new requirements for disclosure of non-financial information for all large companies in the EU. The EC’s proposal says companies should, at a minimum, produce information on environmental issues, social and employee matters, human rights and anti-corruption and bribery.
Some 66 percent of survey respondents say the commission’s proposal should include additional areas to be addressed by companies in their reporting, including corporate governance, supply chain impacts, company specific issues and sector specific issues. Nearly 90 percent (89 percent) say reporting should be forward looking in addition to providing information on past performance.
Meanwhile, the majority of the 600 largest US publicly traded companies are lagging on sustainability practices and performances, with the group falling short in governance, stakeholder engagement and disclosure, according to an analysis released last month by Ceres.
The Road to 2020: Corporate Progress on the Ceres Roadmap for Sustainability, which used a four-tier assessment system, found 49 percent, or 293 companies, are publishing sustainability reports with 29 percent using the Global Reporting Initiative guidelines. This still leaves almost half of the companies without a sustainability report, according to the assessment.
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