Answers to questions that enable actions.
QHow to prioritise which ESG questionnaires to answer?
To help companies prioritise the risks and opportunities of responding or not responding to questionnaires, ESG Global Advisors recommends that a company addresses the following questions:
A company providing strong investor-focused ESG reporting based on a thorough ESG materiality assessment is better-placed to be selective in responding to ESG questionnaires.
QHow do SRI analysts and investors receive their information?
Asset managers typically receive their information from three sources:
In respect of the second, ESG agencies gather their information from company reporting, from media monitoring, from specialist data providers and from other sources such as government agencies.
QShould companies publish standalone sustainability reports or integrated annual reports?
Investors don't care. Provided the information is available to them and is verified and audited where appropriate, investors rarely care what format it appears in.
QWhy can't all ESG/SRI research and data providers use the same data?
The ESG/SRI research industry is relatively young (compared to investment research) and the inputs, techniques and outputs that it uses, deploys and produces are still evolving and there is still competition between different providers on all three points. More significantly, companies have not yet imposed their own disciplines on the process.Read more
Companies could support a transition towards consistency by:
* Publishing any information that they give to one provider to the market as a whole (… and arguably they should do this any way)
* Selecting and reporting data based on the quality of match with their business activities - rather than based on what the analyst asks for (… and refusing to respond in other formats)
* Challenging the false assumption that data comparability between companies is either possible or desirable (see Nothing compares to you )
QWhich reporting frameworks do investors want companies to use?
There is no consistency … and significant misinformation on this point. Most investors ask for more granular and comparable sustainability information from companies. So, companies are keen to provide this. However, companies …Read more
… often fail to identify why investors are asking for the information and whether / how they will actually use this.
Frameworks can be divided into:
* Single-user frameworks - such as those specified by individual research providers - such as Sustainalytics or ISS-ESG
* Multi-user frameworks - such as those developed by data specialists who aim to channel data towards others - such as CDP, Bloomberg or Factst
* Open-source frameworks - such as those intended to be used by multiple users - such as GRI or SASB
Over time, it seems likely that companies will migrate from focusing on 'single-user' frameworks towards 'multi-user' frameworks and 'open-source frameworks'.
In respect of the latter, there are signs that the framework being developed by SASB is gaining traction - largely as it is being adopted by some of the larger passive investors.
Importantly, however, companies should always remember that individual active investors are likely to be most interested in information that is not captured by frameworks - as this is where investment advantage is likely to lie.