One in Three on ASX200 Failing on Sustainability

One third of Australia’s top 200 companies still rate in the two lowest categories of the Australian Council of Superannuation Investors’ annual review of sustainability disclosure.

ACSI has warned that the 33 per cent of companies falling into the two lowest categories, Basic and No Reporting, are disclosing environmental, social and governance (ESG) risks at “levels which are considered to be far from meeting the needs of investors.”

However, the figure represents a decrease from the 40 per cent who rated in the bottom to categories last year. The research showed positive trends in disclosure practices, with almost 50 per cent of companies rating in the top two categories of Leading and Detailed, up from 40 per cent in 2014.

The organisation’s 8th annual sustainability reporting review assessed the level of public reporting by Australia’s largest listed companies, based on the premise that ESG risks can have a significant impact on the long-term performance of companies and that their disclosure is therefore integral to quality investment decision-making.

ACSI’s Chief Executive, Louise Davidson, said that for investors to effectively price and evaluate ESG issues as part of their analysis of existing and potential investments, companies needed to both to explain the risks relevant to them and their industry and how they were managing them.

“A lack of reliable and comparable disclosure of corporate performance, beyond that contained in traditional financial reporting, can undermine effective communication of these longer-term measures of business success by company boards to their owners,” Davidson said.

“While this result is an improvement on previous years at both ends of the scale, it is disappointing that so many companies are still falling short of the reasonable sustainability reporting expectations of their long-term shareholders.

“ACSI looks forward to a significant improvement in future years’ reporting, as the newly-revised ASX Guidelines formally come into effect.”

ACSI is a group of Australian superannuation funds and international asset owners with 31 Australian member funds, collectively managing more than $400 billion in assets on behalf of over eight million Australian superannuation fund members and retirees.

2015 Report Highlights

• 87 per cent of ASX200 companies provided some level of reporting on sustainability factors.

• 73 companies had been reviewed in all seven of ACSI’s research projects since 2008; of these, almost 80 per cent reported to a level of Leading or Detailed, and there were none rated No reporting.

• Reporting guidelines and regulations from ASIC and the ASX Corporate Governance Council continue to have implications for companies’ sustainability reporting. ACSI called for a focus on reporting that is likely to be most meaningful for long-term owners, and take an “above and beyond” approach to the minimum regulatory requirements.

• 12 new companies entered the Leading category in 2015. Of these, one was new to the ASX200, four improved from Moderate in 2014 and seven improved from Detailed in 2014.

• 29 companies had been rated as Leading for four or more consecutive years. Ten of these had been rated Leading for all eight years of research.

• At the opposite extreme, there were three persistent “laggards” who had neglected to report on sustainability risks to any extent for four or more consecutive years.

• Larger companies continued to be more proficient sustainability reporters, with 66 per cent of ASX50 companies reporting to a level of Leading.

Read the full report here.