Taken at face value, more evidence surfaced this month supporting a close relationship between company market performance and the disclosure of environmental, social and governance criteria. Less clear is when more investors will reward ESG disclosure and inspire nondisclosing companies to get on board.
Integrating fundamental equity analysis with ESG criteria boosts the quality of investment decisions, according to the Principles for Responsible Investment.
A similar assessment by Deloitte outlines both the short- and long-term implications of ESG investment management. Further, the Carbon Disclosure Project now has 722 institutional investors representing $87 trillion in assets requesting companies to report their carbon emissions and climate change strategies. This same investor group is also asking companies to report on water and forest use, reflecting a heightened awareness of natural capital and environmental costs.
In 2012 more than 80 percent of the world's largest companies used CDP's carbon reporting system. Carbon Action, a CDP initiative focusing on the highest-emitting companies, seeks to accelerate emission reductions, increase energy efficiency initiatives and bolster risk management while generating positive return on investment. The largest new signatories include JPMorgan Chase, Banco do Brasil and the first signatories from Taipei, including Cathay Financial and Fubon Financial Holdings.
There is also growing awareness of water as a critical business issue with signatories to CDP's water program reaching 530, up 13 percent from last year. That is twice the number of signatories to CDP's forests program, which reached 184 with $13 trillion in assets. In the context of organizational change, these statistics demonstrate the push investors are making for companies to voluntarily report their ESG credentials.
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