April 2019: An increasing number of investors is consulting ESG data before making investment decisions. However, a lack of standardisation in reporting systems and the lack of an accreditation system for sustainability assurance professionals challenges comparability between companies.
Information
Research shows that 93 per cent of the world’s largest companies are implementing environmental, social, and governance reporting (ESG) systems with 75 per cent using GRI standards. This follows data underlining that 80 per cent of mainstream investors consider ESG data before making investment decisions. However, the Chairman of the International Accounting Standards Board is warning that greater sustainability reporting does not necessarily lead to higher levels of sustainability within companies. This is leading to calls for a comprehensive accreditation system for sustainability assurance professionals with appropriate education, experience and procedural requirements.
Implications and opportunities
Accountants often do not have sufficient expertise on sustainability to make informed decisions about sustainability-related risks and to inform investors about the impact of their investments. Simultaneously, the wide range of available reporting standards can lead to piecemeal reporting, challenges comparability between companies, and is a barrier for establishing best practice standards for disclosure.
Limitations
The study is limited in its application and does not provide additional details on the design and implementation of such accreditation systems or necessary regulatory adjustments.
Sources
Amel-Zadeh, Amir and Serafeim, George (2018) Why and How Investors Use ESG Information: Evidence from Global Survey.Financial Analysts Journal, 74 (3). pp. 87-103.
Financial times. (2019). “Greenwashing is rampant” warns chief global accounting body. Retrieved from https://www.ft.com/content/fbc6e4f7-bd89-3971-af89-7c007cb57e8c
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