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Nov 23, 2023

ESG matters: Why long reports and a framework overload are still IROs’ chief headaches

The same issues have been aired by corporate issuers for much of the past decade, so what can be done?

As always, one of the main joys of working for IR Magazine and Governance Intelligence is having regular opportunities to meet some of the world’s brightest corporate minds at our events around the world.

This week’s visit to Clifford Chance’s London offices, where we hosted the ESG Integration Forum, was no exception. As ever, a packed roster of IROs, heads of ESG, investors, analysts, lawyers and more were on hand to dispense myriad words of wisdom to our audience – for more of that, check out our full report on the event when it is published next week.

In between sessions, however – when enjoying some of Clifford Chance’s second-to-none catering – it struck me that IROs are still grappling with some of the same challenges around ESG communications that have been in the air even since I started at IR Magazine a decade ago.

It should be noted that some challenges are – thankfully – a thing of the past. Getting senior management’s buy-in to matters environmental, social or governance is no longer an issue for most corporates, and nor is convincing investors that such factors are worth bothering with. But there are two aspects of ESG communications that remained consistent, not just through the years but also from session to session in London.

The first: reports are too long. Nobody in the corporate chair wants to produce a 300-page behemoth each year, and nobody in the firm’s audience (with the exception, perhaps, of the most dedicated data-hound) wants to read it.

Various approaches were offered by our panelists and audience members alike. For some, it was a case of giving investors and analysts a transparent toolbox of data on the IR website for them to plug into whatever modeling suited them or give them the exact level of granularity required.

Of course, providing that data requires careful thought: it’s not a case of just dumping every metric available onto an open-access part of the website. And investors still need guiding to key performance data where possible, something IROs are already well versed in.

The second issue is a bit thornier: the problem of a regulatory marketplace governed by competing regulatory bodies, with little agreement between them over what is best. Whether the GRI, Principles for Responsible Investment, International Sustainability Standards Board (ISSB) or Taskforce on Nature-related Financial Disclosures, issuers said choosing which framework to align with and which to ignore was an ongoing challenge.

Some market regulators are making the decision for corporates by making reporting standards mandatory for listing in a given market. The latest, Brazil, is hoping to make ISSB’s standards mandatory for reporters by 2026.

As with plans to combat the climate emergency at large, however, there is little sense of which is the right direction. In the meantime, IROs are left with an increasingly large task to complete when communicating with the markets. If it was up to me, we’d pick one standard and work on making it the best available.

Alas, readers, I’m not in charge. If you were, what would you want to happen? Let us know, either on LinkedIn or via email on editorial@irmagazine.com

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