12 Feb WHY IT’S TIME TO GET CRACKING ON SUSTAINABILITY DISCLOSURES
If there’s one thing we can learn from Larry Fink’s recent letters to BlackRock clients and company CEOs, it’s that investors and other stakeholders are looking for companies to demonstrate the progress they are making towards to a low carbon economy in 2020.
His letter to CEO’s warned: “Given the groundwork we have already laid engaging on disclosure, and the growing investment risks surrounding sustainability, we will be increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them.”
Fink also states: “Our investment conviction is that sustainability- and climate-integrated portfolios can provide better risk-adjusted returns to investors.”
BlackRock’s not alone in this view. Research house MSCI’s identified “Climate Change Innovators” as one of its top 5 trends for the new decade and predicts that in 2020, investors will “turbocharge their use of alternative data to spot the companies plotting to take a lead in propelling us toward a carbon-free economy.” And they’re talking about major companies, not startups.
Working with companies on their Sustainability reporting and ESG initiatives over the past 7 years, I’ve learned that investors aren’t expecting you to go from zero sustainability and climate disclosure to hero disclosure, but they do expect you to report on the issues that are material to your business. ESG reporting is constantly evolving so once you get started, your reporting can evolve too.
As we kick off 2020, if you’re just commencing your ESG reporting journey, here’s a few things to consider:
- Start with a realistic goal like a Sustainability Statement in your Annual Report or a short form Sustainability Report using Global Reporting Initiative (GRI) standards: https://www.globalreporting.org/standards/
- Create a cross-functional team to manage ESG reporting – it’s important to include representatives from communications and investor relations, but make sure you also have team members who can represent customer, operational and community perspectives
- Consider becoming a supporter of the Task Force on Climate-related Financial Disclosures (TCFD). There’s no cost to support the TCFD and it’s ok to start reporting on some aspects only: https://www.tcfdhub.org/about/