Survey finds demand for stronger ESG disclosure

Institutional investors want better disclosure from issuers on the environmental, social and governance (ESG) factors impacting their businesses, says advisory firm Ernst & Young Global Ltd. (EY).

The firm’s latest survey of institutional investors finds that almost all of them (97%) are assessing companies’ non-financial disclosures, up by almost 20% from 2017. More than half of those investors (56%) say the disclosures are currently inadequate.

“Investors no longer want to know what the company is doing, but how they’re doing it—and how their ESG impact stacks up against others,” said Thibaut Millet, climate change and sustainability services leader at EY Canada, in a statement.

“Better accounting standards for non-financial information are needed to establish standardized data and consistent metrics cross-industry.”

The firm reports that 70% of investors say regulators should lead the way in enhancing non-financial disclosure, but that industry trade groups should also have a hand at determining relevant sustainability disclosures.

“Having a common framework in place would be beneficial to both institutional investors and companies looking to receive their investments,” Millet added. “Investors would have the ability to compare non-financial data across industries and regions, while businesses would benefit from greater transparency to help restore trust during a time when credibility may be at risk.”

EY also reports that 89% of investors believe ESG factors will become even more valuable in a market downturn.

“Non-financial information is playing a pivotal role in investment decision-making, and will increasingly continue to weigh on Canadian investor minds as they take a step back to focus on a business’ value creation to sustain long-term growth,” Millet said.

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The staff of Advisor.ca have been covering news for financial advisors since 1998.