By Virginia Harper Ho
It’s a new era of environmental, social and governance (ESG) disclosure and directors need to take notice.
Many investors are voicing concerns about the limited nonfinancial disclosure in companies’ annual reports and proxy disclosures, even for areas like material climate-related risks that have been the subject of Securities & Exchange Commission (SEC) guidance. And although most public companies produce sustainability reports for consumers and other corporate stakeholders, these reports often lack the quality, reliability and comparability investors need for financial analysis.
Majority votes in favor of climate-related shareholder proposals this proxy season are evidence that investor demand for information on material ESG risks is rising.
Recent reports by the Organization for Economic Co-Operation and Development and the G20’s task force on climate-related financial disclosure have also stressed the financial impacts of ESG risks and the importance of ESG risk oversight for corporate boards.