Written communications


Answers to questions that enable actions.

Q How 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:

  • What are the ESG interests of top current or potential investors? Does the questionnaire relate to an information source that that is used by these investors, or an engagement activity that they support?
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  • Does the questionnaire relate to an ESG factor identified as financially material for the company? Could answering the questionnaire help the company to communicate more effectively on this ESG factor?
  • How much effort is required to answer the questionnaire, and what are the risks of not doing so? Is it likely to impact access to capital, damage the company’s reputation, or result in engagement follow-up that is even more time-consuming?
  • 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.

    Q How do SRI analysts and investors receive their information?

    Asset managers typically receive their information from three sources:

    • from companies' published reports;
    • from information gathered by ESG ratings agencies;
    • from their own contact with companies.

    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.

    Q Should 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.

    Q Why 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.

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    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 )

    Q Which 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 …

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    … 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.