According to the CFO Journal, The Wall Street, providing frequent updates about the sustainability of a business is vital for top-level executives, financial analysts and investors, as they rely mainly on these data while assessing an organization’s creditworthiness and reliability. But, still, there is no set global framework to report performance on Environment, Social and Governance (ESG) criteria, except to just few exchanges and governments making ESG disclosure mandatory.
It is interesting to note that though there are no set guidelines, there is a motivating force for heads to reveal this information. And that motivation lies mainly in the changing pattern at the global level. Financial analysts, by and large, have started considering an organization’s ESG performance while recommending purchasing or selling of stocks. Asset managers need regular information from organizations to advise real-time investment decisions. Lenders are, additionally, investigating sustainability metrics when they give advances to organizations or endorse their securities.”
Thus, organizations across sectors are unveiling more bits of knowledge into their ESG performance than ever before. According to The Wall Street Journal’s latest sustainability ranking for the quarter ended Dec. 31, the organizations meeting the Journal’s minimum disclosure requirements a year ago leaped to 5,379 organizations, up by 23% since 2017. The Journal’s methodology assesses how organizations handle ESG issues and create value for investors over the long term. It depends on material information covering 26 categories relevant to specific industries, as per the Sustainability Accounting Standards Board, a not-for-profit organization that helps investors and companies create sustainability reporting framework. Simultaneously, not revealing ESG information in a timely way can affect organizations’ position in the Journal’s ranking. The Journal expects organizations to provide at least 20 financially material data points that are less than two years old to be considered for the ranking.
To get around lagging disclosures, a few investors are preferring calculations that track organization mentions in the news articles. The CFO Journal gave instances of organizations where ranking was improved due to an electric vehicle deal published in a news, or another news inclusion about a new educational endowment and affordable housing projects by a company.
Disclosures on these issues assist in distinguishing the right targets, said Steve Norcini, senior value portfolio director at speculation firm Wilmington Trust Investment Advisors Inc. ” These are important metrics that investors need to have to assess the value and quality of the company,” he said. “And to the extent that they’re not reporting it, they’re falling on the job.”