The EY 2018 Global Climate Change and Sustainability Services study of institutional investors reveals a global consensus that ESG information is now critical to investor decision-making. Investors around the world have come to expect broader, more useful reporting of material nonfinancial performance information, which they are increasingly using to assess the creation of long-term value.
After years of sporadic, often promotional reporting of nonfinancial information, issuers have risen to the challenge of meeting investors’ demands for high-quality nonfinancial disclosures. Their first step in doing so is to better understand the material topics for an organization or an industry: that is, determining which topics, measured with which metrics, will yield the most useful view of the risks and opportunities that drive the long-term value of their companies. Greater transparency and consistent, comparable data on these topics can also help restore trust in business at a time when the credibility of corporate institutions is at risk.
Investors surveyed in this year’s study affirm that, while companies have improved their ability to discern what is and what is not material to valuation, both issuers and investors look forward to consensus on how to report and value performance on these material topics. Such consensus is likely to require intelligent collaboration between government, industry groups and investors in the years ahead and it couldoffer business the opportunity to deliver greater certainty to investors, shareholders and customers alike.