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INCR consults on uniform listing requirements for ESG disclosure

22 Apr 2013

The Investor Network on Climate Risk (INCR), a network over over 100 institutional investors, has published a consultation paper containing recommendations for the integration of environmental, social and governance (ESG) disclosure requirements into the listing rules of the world's stock exchanges. The paper seeks to lead to the implementation of uniform mandatory disclosure requirements that would be applied by entities listed on stock exchanges adopting the requirements. The INCR expects to submit a final document for consideration to the World Federation of Exchanges (WEF) annual meeting to be held in October 2013.

The consultation paper, Proposed Sustainability Disclosure Listing Standard for Global Stock Exchanges, was developed with the support of Ceres, an investor-founded coalition of investors, companies, policy makers and others. The proposals in the consultation paper were developed by a number of investors who participated in the INCR Listing Standards Drafting Committee, and relate to the Sustainable Stock Exchanges (SSE) Initiative.

The consultation paper proposes three key segments of a uniform sustainability listing disclosure requirement, which are considered the minimum to meet investor expectations:

  1. A materiality assessment in annual financial filings where management discusses its approach to determining the company’s material ESG issues. This would include disclosure of how material ESG matters are determined, who was involved in the process, and which matters were determined as material and how those matters interrelate to business strategy and financial performance
  2. A hyperlink in annual financial filings to a Global Reporting Initiative (GRI) Content Index, which will assist investors to determine which disclosures are available and to locate them across various reports. The GRI Content Index acts as a roadmap to GRI disclosures, and implementing this recommendation will address investor concerns about a lack of consistency in reporting and reduce time consuming tasks in investors finding relevant ESG information
  3. Corporate ESG disclosure, on a “comply or explain” basis, on key ESG themes in the format and location of the company’s choosing. This would cover the following topics: climate change, diversity, employee relations, environmental impact, government relations, human rights, product impact and safety, and supply chain.

In addition, the paper contains a number of other recommendations, including:

  • the synchronisation of financial and sustainability reporting timeframes
  • a move to requiring data in ESG reports to be independent assured, within a five to seven year timeframe
  • the need to consider when smaller listed companies should be required to comply with the new requirements, to allow them sufficient time to prepare
  • the monitoring of developments and requirements, investor education and so on.

The Consultation Paper is open for comment until 1 May 2013. Click for press release (link to Ceres website).