Last week, the Ontario Securities Commission weighed in on the need for companies to report more information about their environmental, social and governance, or ESG, practices, saying that now was not the time to adopt new rules forcing higher disclosure standards.
It begged the question as to how many companies are already reporting on ESG practices.
According to research group Corporate Knights, the number is still relatively small. It recently reviewed the ESG practices of the companies in the S&P/TSX 60 Index, and found that only 10 out of those 60 disclosed detailed data on four factors used to rank them on corporate social responsibility: energy, carbon, water and waste. It is safe to say that the proportion of publicly-traded companies outside of this index that report on these same factors is probably even lower.
According to a recent article in the Globe and Mail, given the ability of ESG risks to impact an investment’s potential return - think BP for example - some portfolio managers are now urging companies to adopt ESG reporting standards. They argue investors would be better able to analyze potential risks associated with an investment.
In that sense, ESG reporting is fundamentally no different from other disclosure; it provides analysts and investors alike with information material to their decision-making. By going the extra mile to be clear, concise and forthright about their ESG practices, companies could potentially garner greater love from the street, build credibility and generate all important trust.