The London Stock Exchange Group (LSE) has issued new guidance setting out recommendations for good practice in ESG reporting. The global guide responds to demand from investors for a more consistent approach to ESG reporting, which is now a core part of the investment decision process.
The guide, which is available online to both issuers and investors, has already been sent to more than 2,700 companies that have securities listed on LSEG’s UK and Italian markets, with a combined market capitalisation of more than £5 trillion.
Its intention is to help companies gain a clear understanding of what ESG information investors would like to see provided by companies. “This guide is specifically focused on improving the dialogue and information flows between issuers and investors, which will in turn benefit the market as a whole, as good practice in ESG becomes more and more relevant in the investment chain,” explains Raffaele Jerusalmi, CEO of Borsa Italiana and Director of Capital Markets at LSEG.
The area of sustainable investment has changed dramatically, with consideration of ESG factors now seen as standard for most large institutional investors. According to the Global Sustainable Investment Alliance, over a third of professionally managed assets globally incorporate ESG approaches, which represents more than US$20 trillion of assets under management.
“Institutional investors need investment grade ESG data to accurately inform their decision making and asset allocation. Exchange operators have a major role to play in supporting enhanced data disclosure so we commend the London Stock Exchange Group for their leadership towards improving dialogue and ESG data flows across the investment chain and call on other exchange groups to follow suit,” notes Martin Skancke, Chairman of the Board for the UN PRI.
The guide aims to make companies more aware of the importance of providing high quality ESG information, engage them on sustainability-related issues, and help them to navigate the complex landscape of ESG reporting. It also hopes to enable richer data flows between issuers and investors, thus enabling investors to make better informed decisions, and has expressed support for the consolidation of global ESG reporting standards.
“It is vital that investors are able to measure and capture their exposure to ESG risks and opportunities and the launch of LSEG’s guidance will help companies understand what good ESG reporting looks like,” concludes Mark Makepeace, CEO of FTSE Russell.