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The report considers trends in investor demand for and use of environmental, social and governance (ESG) information, and recommends how professional accountants can better support their organisations in responding to these demands, and ultimately improve the management and reporting of ESG performance.
The report highlights an evolving trend towards greater interest in ESG factors, and integration of these factors and ESG performance information into investment processes and decisions. It also reviews investor approaches to acquire information on ESG factors, including positive and negative screening, engagement and ESG integration. To alert professional accountants to essential ESG metrics and indicators sought by investors, the report provides a sector-neutral list of core performance indicators most frequently used by investors to evaluate ESG performance, and a review of how investors might consider the financial implications and monetisation of these factors.
“As professional accountants both support and fill leadership roles in management operations and control, as well as stakeholder communications, they are well placed to apply accounting discipline and rigour to the collection, analysis and reporting of ESG data, and to support the incorporation of ESG factors into their organisation’s management processes, systems and reporting”, said Roger Tabor, chair of the PAIB Committee. “Their involvement in improving the relevance and quality of their organisation’s internal and external business reporting will be critical to meet the challenge of increasing the use of ESG information.”
In response to the challenges of ESG integration, the report recommends five actions for the accountancy profession and professional accountants in business: