Investment professionals are becoming more and more interested in understanding how environmental, social and governance (‘ESG’) matters affect businesses. So we asked them to talk candidly and in some depth about how they use ESG information, whether it is growing in importance, how well they think companies do in communicating it, where the gaps are in ESG reporting and how they think Integrated Reporting can help. Our report, produced with the International Integrated Reporting Council, includes interviews with senior investment professionals from some of the world’s biggest investment institutions, with almost US$2 trillion of assets under management between them.
Our interviewees said that integrated ESG information allows them to assess a host of important variables including whether to invest, divest, engage or look closer to see if there are other problems in the business. But, crucially, they also said that there are gaps in the ESG information companies report and that often it isn’t very well integrated into corporate communications. They told us that reporting under clear frameworks, for example the International Integrated Reporting Council's <IR> Framework, can help. In particular they want information that is more clearly linked to the business model, information they can rely on, and information that clearly links to how a company creates value and manages risk.
While acknowledging that ESG information is a fast-developing aspect of valuation, they all argued for improved data, more connectivity and consistently applied frameworks.
Director of Investor Engagement
Marie Claire Tabone
Manager, Investor Engagement