There has been a spike in ESG reporting by Australian listed companies but some glaring gaps remain, according to the Australian Council of Superannuation Investors (ACSI).
New research on ESG reporting by ACSI reveals that 22 people died in workplace fatalities in 2018, yet there is no requirement to report this information to the market. Instead it is collected by state-based agencies and may vary by sector, making it difficult to locate.
ACSI CEO Louise Davidson said, “Safety data is material to our members. We are concerned that the lack of transparency about workplace deaths may mask the extent of this tragedy and slow the identification of systemic risks.”
More generally, our research shows that the number of companies that comprehensively report on ESG matters has improved 19 per cent over the past five years. Over half of Australia’s largest listed companies now provide in-depth disclosure and assessment of their material ESG risks.
Davidson said, “Information about ESG practices is a critical piece of business intelligence. Investors need to understand how companies are tackling ESG issues to make their investment decisions.
“This is the 12th year that we have assessed ESG reporting by the ASX200, as well as writing to each company about their performance. Most companies now recognise the need to report on a range of material, non-financial measures.”
Key findings from the research include:
- 16 of 22 reported workplace fatalities were contractors, suggesting there is a disconnect between the safety practices of companies and the standards they require of contractors.
- 67 companies disclosed no safety information, including eight companies that pay executive bonuses based on safety outcomes. This lack of information is out of step with investor expectations.
- The number of companies reporting against the Taskforce on Climate-related Financial Disclosures framework has doubled in 12 months, with over a quarter of ASX200 companies now committed to the framework.
- The wide range of climate scenarios used, and current levels of reporting, make comparisons between companies difficult.
- Few companies are disclosing long-term, emissions-reduction targets of net zero emissions by 2050.
- Consequence management disclosure, which describes how companies deal with poor behaviour and breaches of conduct standards, is gaining prominence in the wake of the Financial Services Royal Commission.
- Only 21 per cent of executive leadership roles in the ASX200 are held by women, and 32 companies still have all male leadership teams.
- Many companies are recognising the value of managing and retaining their workforces, disclosing outcomes of employee engagement surveys, voluntary turnover and training, although the lack of standardised reporting makes comparisons difficult.
As in past years, the research identifies leaders and laggards (companies who have provided no ESG reporting for two or more years) in ESG reporting.
Looking ahead to the next 12 months, Davidson said, “We will build on our new, more detailed data set to assess company performance in key areas, such as safety and climate risk reporting.
“We will continue to engage with companies on their ESG performance and the issues that we see as important to producing better outcomes for superannuation members’ retirement incomes.”