Investor coalition backs plans for more non-financial reporting
A coalition representing around 700 international institutional investors with more than $65 tn in assets under management has thrown its support behind a proposal that would oblige large European firms to divulge diversity policies and material non-financial information in their annual reports.
Coalition members ‘strongly support the European Commission (EC) proposal published on April 16 mandating large European companies to report material non-financial information and their diversity policy in their annual reports,’ notes a press release. ‘While some aspects of the proposed legislation can be strengthened, the legislation must not be weakened by the co-legislators.’
The coalition, which includes associations such as the International Corporate Governance Network, Netherlands-based investor forum Eumedion and the UNEP Finance Initiative, calls on the European Parliament to ‘adopt the provisions without weakening the provisions of the text.’
The proposal would oblige European companies with more than 500 employees to disclose policies, risks and results relating to a series of issues, including the environment, human rights, anti-corruption and bribery matters, diversity on boards and social and employee-related aspects, the commission announced in April.
The measures were first suggested in April 2011 and the EC adopted the proposal after consultation with member states, companies and investors. The proposal still faces approval by the European Parliament and European Council.
The proposal ‘represents a significant step forward for European and international investors who seek timely, material, comparable and forward-looking information on non-financial risks and opportunities, in order to make better informed investment decisions,’ the coalition of investors says. ‘Failure to adopt the legislation will make such decisions more difficult and costly for investors, and will increase the risk of harming European companies’ international competitiveness.’
Other members of the coalition include the European Federation of Financial Analysts Societies, the Climate Disclosure Standards Board, the Institutional Investors Group on Climate Change and international environmental reporting organization CDP.
A survey of 90 European investors and analysts released on June 6 by the European Sustainable Investment Forum, which has also joined the coalition in supporting the proposal, shows 92 percent believe ‘non-financial information should be better integrated with financial information.’
The survey also reveals 93 percent feel current reporting is not sufficiently comparable across companies, 73 percent agree non-financial information should be subject to shareholder approval, and 93 percent say current reporting methods provide too little information ‘to quantify the materiality of non-financial factors in financial terms.’