IR directors to ‘dodge bullet’ when it comes to new reporting requirements, Verdantix reports
A series of new rules by stock exchanges around the world on disclosure of non-financial information has highlighted reporting of environmental and social issues but a lack of enforcement mechanisms means most IR directors and CFOs will not follow the guidance, according to a study by independent analysis firm Verdantix.
The study, which covers new reporting rules around non-financials such as environmental and social issues on 10 stock exchanges worldwide, also concludes that several stock exchanges in emerging markets in the past year have taken non-financial disclosure requirements a step further than exchanges in developed economies.
‘The stock exchange announcement at Rio+20 generated extensive media interest in the potential for stock exchanges to drive disclosure on environmental and social risks,’ says report author Abbie Curtis, an analyst at Verdantix, in a press statement. ‘Our analysis identifies 10 stock exchanges with policies targeting non-financial reporting. Several of these are in emerging economies such as China and India, leaving behind larger rivals in Europe, Japan and the US.’
The Verdantix study, which includes Bombay Stock Exchange, the Johannesburg Stock Exchange, the London Stock Exchange (LSE), the Australian Securities Exchange and others, predicts that new measures will have little impact as they carry little in the way of means for enforcement.
New measures studied include disclosure rules in emerging markets such as India surrounding environmental and social impacts of extraction industries, sustainability reporting requirements in South Africa and stricter environmental and social reporting requirements in Australia imposed by Australia’s Corporate Governance Principles and Recommendations.
The study also covers national legislation in Europe, including a French requirement for reporting on a list of 42 environmental, social and governance indicators and a UK government regulation that will require 1,800 companies listed on the (LSE) to start disclosing greenhouse gas emissions from April next year.
‘Stock exchanges in emerging markets are actively encouraging listed firms to disclose non-financial metrics, while in European markets national regulations are starting to mandate specific disclosures,’ the report says. ‘Verdantix’s analysis finds that despite this increased interest in non-financial metrics, there is little in the way of enforcement. The onus is on firms to report voluntarily, using respected reporting frameworks, to ensure thorough risk management and positive investor relations.’
The report predicts that a lack of any clear means of enforcement in many cases will mean most ‘CFOs and investor relations directors will dodge the bullet and rely on the head of sustainability to conduct blocking and tackling when investors request data.’
