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London Stock Exchange ESG reporting guide targets company, investor needs

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The London Stock Exchange Group (LSEG) has published guidance for companies on how to report environmental, social and governance (ESG) information to meet investor demand for better data.

The exchange group delivered the guidance as part of its membership of the UN Sustainable Stock Exchange (SSE) initiative. Several other exchanges also committed to providing listed companies with similar guidance as part of an SSE campaign “to close the ESG guidance gap”.

The guidance document is intended to help companies understand what ESG information they should provide and how they should provide it, following demand from investors for a more consistent approach to ESG reporting.

Speaking at the launch event in London yesterday, Martin Skancke, chairman of the PRI, said that investors are not getting enough high quality, reliable and comparable information on ESG. Uniform provision of data is needed so that investors can put the information to practical use, he added.

Investors speaking on a panel at the launch event also welcomed the guidance.

James Bevan, chief investment officer at CCLA, which manages investments for UK charities, said: “The real strength of this initiative, about getting common standards, is a great big wake-up call to the global industrial participants that we must know what is going on and if we do not know we cannot make knowledge-based decisions and therefore we cannot discharge our responsibilities to investors.”

Russell Picot, chairman of the HSBC Pension Fund, said the guidance document was “an excellent report”.

“It resonated very strongly with my personal beliefs about the importance of this topic,” he said.

The LSEG’s guidance builds on model guidance produced by the SSE and also takes into account other ESG standard and reporting initiatives, such as the recommendations announced late last year by the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures.

The guidance report states that “research suggests that chief executives tend to overestimate their success in communicating with investors”. It cites a 2015 study by Accenture and UNGC, in collaboration with the Principles for Responsible Investment (PRI), according to which 38% of CEOs believe they are able to accurately quantify the business value of sustainability initiatives, but that just 7% of investors agree.

The guidance, which was sent to more than 2,700 companies that have securities listed on LSEG’s UK and Italian markets, can be found here.

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