Asset manager Schroders has warned against adopting an “overly granular approach” to non-financial data, as it joins a group of stakeholders pushing for better reporting by businesses of environmental, social and governance (ESG) information.
Asset manager Schroders has warned against adopting an “overly granular approach” to non-financial data, as it joins a group of stakeholders pushing for better reporting by businesses of environmental, social and governance (ESG) information.
In June, the firm joined nine other stakeholders in urging the European Commission to require more companies to disclose data and implement minimum mandatory requirements that are comparable with global standards of reporting, when it makes an upcoming revision to the Non-Financial Reporting Directive (NFRD).
The NFRD currently requires large institutions such as banks and insurance firms, as well as large publicly-listed companies, to report a range of data that could impact their sustainability over time.
Schroders, which manages USD662.6 billion of assets on behalf of institutional and retail investors, affirms that “transparency by all, whether financial services providers, or the companies in which we invest, is key”.
Elisabeth Ottawa, deputy head of Public Policy for Schroders, says that having more data will allow asset managers to stand by sustainable companies in the bid to ‘build back better’ after the coronavirus pandemic.
“While changes to the NFRD will not fall in place early enough to impact the immediate challenge of the Covid-19 crisis, we believe that for the stability and growth of our economy, companies with long term prospects should be supported, and short-term opportunists who are seeking to capitalise on price distress should be rejected,” says Ottawa. Publishing this data will allow investee companies to prove themselves with regard to “the strength of their social contract with all stakeholders along with their broader responsibilities”.
But managers should use this non-financial data to help support companies on their path to sustainability, rather than turning it into a “tick the box” exercise for investors.
Ottawa explains: “For the immediate future, the focus must be now on investor-centric, principles-based implementation with the aim to help investors make an informed choice and avoid an overly granular approach stifling innovation and turning this into a tick the box exercise.”
Over the past few years, concerns have been raised by investors such as Amundi over an official EU taxonomy for sustainable investment, since it may bring more clarity but also more rules to the so far investor-led market, stifling innovation.
“As regards investee companies, we see our role as an active manager to encourage and support companies on their sustainability path, which requires strong stewardship capabilities.”
Schroders was joined by EFAMA, ACCA, Accountancy Europe, Association of German Banks (BdB), CDSB, Frank Bold, IIGCC, ShareAction, and WWF in pushing for more comprehensive reporting of non-financial data.
Ottawa adds that the informal group of stakeholders is looking for more projects in sustainable finance: “For the moment, there seems to be interest in the area of data and non-financial information, corporate governance and other initiatives linked to the European Commission’s priorities in sustainable finance. The group will also work in coordination with the European Parliament’s Intergroup.”
