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Institutional investors move to increase ESG reporting from stock exchanges

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A team of an advocacy group, asset managers and institutional investors have joined forces to engage global stock exchanges to incorporate a uniform standard for sustainability reporting.

The lobby, led by Ceres and supported by BlackRock, as well as a range of global institutional investors, has submitted a proposal to the World Federation of Exchanges (WFE).

It aimed to increase harmonisation and disclosure of sustainability and environmental, social and governance (ESG) matters, across all stock exchanges.

Ceres said the proposal was taken to the WFE as clients, and institutional investors, in general came under heightened pressure for responsible stewardship.

However, many cite uncertainty of information as a barrier to sustainability reporting.

The report submitted to WFE calls for three aspects to be harmonised, including the disclosure of material ESG risks faced by listed companies, a minimum standard for ESG information disclosure and improving access to information.

The advocacy group said the global standard could see companies openly discuss their process for ESG risk determination, a better disclosure or ‘comply or explain’ mechanism, and simple navigation to an ESG disclosure index.

Ceres said the exchanges should determine when it applied to listed firms, but recommended large caps comply almost immediately after the report is approved, with smaller-cap firms being given a reasonable timeframe for implementation.

The submitted report was aided by the support of more than 100 institutional investors and backed by the world’s largest asset manager, BlackRock.

Thomas DiNapoli, a New York State Common Retirement Fund trustee and state comptroller, said it was known that long-term growth required integrated ESG matters.

“A global standard for sustainability reporting would give investors data to assess performance and risk, while allowing exchanges and companies to address specific market regulations and cultures,” he said.

The report is now open for consultation, being run by the WFE, for investors and stock exchanges to comment.

The proposal also received backing from the Principles for Responsible Investment, the Global Reporting Initiative and several other asset managers.

Mindy Lubber, president of Ceres, said investors had long lamented the lack of disclosure and comparability.

“The time has come for a broadly adopted sustainability disclosure standard – one that moves beyond voluntary approaches,” she said.

“We look forward to the feedback from exchanges.”

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