Top Companies are Disclosing Sustainability Risks, But Not the Way Investors Want

The Wall Street Journal, 12/01/2016

A majority of U.S. listed companies are disclosing sustainability risks to investors, but not in any meaningful detail, according to a study by the Sustainability Accounting Standards Board, or SASB.

The SASB, a nonprofit group that develops reporting guidelines that help companies account for environmental and social risks, analyzed annual reports of more than 700 top companies across 79 industries. It found that 81% addressed social and environmental risks. However, 52% of the companies used vague, boilerplate language to flag the risks without articulating management response strategies.

“The good news is that companies are already acknowledging the materiality of these issues for themselves,” said Jean Rogers, chief executive and founder of SASB. “But the quality of that disclosure continues to be poor,” she added.

U.S. companies are required to disclose in financial filings risks they consider material, or those likely to affect a reasonable investor’s decision to buy or sell the security. In recent years this has increasingly included social, environmental and sustainability factors such as water management, greenhouse gas emissions and impact on indigenous peoples.

However, many companies approach sustainability disclosure as “free insurance,” Ms. Rogers said. Companies are adding volumes of vague, boilerplate disclosure that fails to inform their stakeholders on the real materiality of those risks.

The inefficient disclosures in company financial filings to regulators often stand in contrast to the more detailed discussions these firms provide in corporate social responsibility reports, which are voluntary.

Still, those voluntary documents often lack financial rigor and metrics that would help investors price the sustainability risks facing the company, she said.

One outcome is that shareholder resolutions associated with social and environmental issues have skyrocketed. Those related to social and environmental issues accounted for 67% of all such proposals filed in 2016, up from 40% in 2012, according to SASB.

“Investors want to know not just that it’s a risk…but how the company is managing that risk,” Ms. Rogers said. “The markets can’t respond to the information if the information that’s provided is inadequate or of insufficient detail,” she added.

By |2019-03-05T09:41:29-05:00December 5th, 2016|Categories: News Watch|Tags: , |Comments Off on Top Companies are Disclosing Sustainability Risks, But Not the Way Investors Want
Nous n'avons pas pu confirmer votre inscription.
Thanks for your subscription!

Sign up to receive our blog and latest studies