Years of effort to increase corporate reporting on sustainability is having little impact on global stock exchanges, despite reports showing growing demand from investors, says Mike Tuffrey.
Only 128 of the 4,609 largest companies listed on the world’s stock exchanges currently disclose basic information on their social responsibilities. This is “disconcertingly low” according the Canadian investment advisory firm, Corporate Knights Capital, whose study Measuring Sustainability Disclosure crunched the numbers in October.
Also in October, the largest ever gathering of stock exchanges met to discuss sustainability disclosure under UN auspices in Geneva. Organised by the Sustainable Stock Exchanges initiative, some of the largest took part including NYSE, NasdaqOMX and LSE. This provided “a global platform to demonstrate leadership and understanding of the sustainability-related opportunities and challenges”, or so the initiative claimed. Unfortunately its annual review of the 55 exchanges around the world found that only 12 currently require any aspects of environmental and social reporting for at least some of their companies, with just seven requiring such reporting for all listed companies.
Something isn’t working, as investors increasingly want this information – at least according to those responding to a PwC survey earlier in the year. Four in five investors – with assets under management worth $7.6 trillion – said they do consider sustainability issues in their investment strategies, citing risk mitigation, ethical conduct and performance as their driving concerns.
If investors want it but stock exchanges won’t require it, what should sustainability-driven companies do? First, keeping disclosing the information yourselves, as forward thinking investors will come looking for it. Second, make much clearer than most do today that sustainability issues are an integral part of your business strategy and that future earnings depend on overcoming environmental constraints and enhancing social outcomes. That will join up the dots for investors.
What about the majority of stock exchanges who still don’t get it? Ultimately investors will vote with their feet and find other ways of raising capital and monitoring their investments. For the laggards, the message is – require disclosure or die.
Meanwhile, news comes that businesses based on the London-based Social Stock Exchange – dubbed the “home of impact investing” – are increasing market capitalisation while delivering social impact, according to the Exchange’s second anniversary assessment report.
Not all acorns grow into mighty oaks to rival the established players, but some do.
Mike Tuffrey is Co-founding Director of Corporate Citizenship.