The Investment Company Institute (ICI), a global association of investment funds representing $34 trillion in AUM, announced that its board of governors has unanimously a statement encouraging US public companies to provide enhanced reporting on ESG factors. The statement urges companies to provide disclosure consistent with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) and the standards of the Sustainability Accounting Standards Board (SASB).
George C. W. Gatch, ICI Chairman and CEO of J.P. Morgan Asset Management, said:
“Fund managers require access to financially material ESG-related information from corporate issuers that is accurate, comparable, and timely. There is an emerging global consensus that companies should follow TCFD recommendations and SASB standards, and ICI members support this approach to help ensure fund managers can get useful information to make important decisions consistent with the investment objectives of funds and the needs of their shareholders.”
Investment managers have significantly increased the integration of ESG factors into the investment process over the past few years, and investors have expressed interest in continuing to grow their allocations to sustainable investments. A lack of consistent, comparable and material of reporting and disclosure on sustainability issues is often cited as a key obstacle to increased ESG investing. Last week, for example, in a survey conducted by BlackRock covering 425 investors in 27 countries, representing nearly US$25 trillion in AUM, 53% of respondents reported ‘poor quality or availability of ESG data and analytics’ as the greatest barriers to the adoption of sustainable investing practices.
Sustainability related reporting and disclosure initiatives like TCFD and SASB have emerged to remedy this data gap, and several major investors have been encouraging companies to adopt these frameworks and standards.
The TCFD was established by the Financial Stability Board in 2015, with the goal of developing consistent disclosure standards for companies, in order to enable investors and other stakeholders to assess the companies’ climate-related financial risk. The recommendations were published in June 2017, with guidance for disclosures covering governance around climate-related risks and opportunities, the actual and potential impacts of these risks and opportunities on the company’s businesses, strategy, and financial planning, the processes used to identify, assess, and manage climate-related risks, and the metrics and targets used to assess and manage these risks and opportunities.
The SASB Foundation is a non-profit organization, established with the mission to establish industry-specific ESG disclosure standards for companies. SASB has developed a set of 77 industry-specific standards, designed to enable investors to assess the materiality of reported sustainability information, and to compare companies on these metrics on a global basis. SASB recently announced a planned merger with the International Integrated Reporting Council (IIRC) to form the Value Reporting Foundation, aiming to provide investors and companies with a comprehensive corporate reporting framework across the full range of enterprise value drivers and standards to drive global sustainability performance.
ICI President and CEO Eric J. Pan, said:
“We’re taking this important step now to ensure that fund managers have access to decision-useful ESG-related information that is consistent and high quality. Encouraging companies to report using widely accepted disclosure frameworks will help improve the quality and, ideally, the quantity of comparable ESG data. Moving in this direction should also aid policymakers in the United States and abroad as they consider action on ESG-related issues.”