By Ed King
Canada, New Zealand, Australia, Kazakhstan and the US Chamber of Commerce have been fingered as key culprits in blocking attempts to promote environmental reporting during the Rio+20 negotiations.
Steve Waygood, Chief Responsible Investment Officer at Aviva Investors said those parties had blocked their proposal for corporate sustainability reporting to become standard practice across the world – citing the US Chamber of Commerce in particular as ‘undermining everything’.
Aviva’s submission called on all United Nations member states to ‘commit to develop a Convention that mandates company boards to consider sustainability issues, and to integrate those issues that they consider to be material within the reporting cycle, in their Annual Report and Accounts – or explain why if they do not’.
Environmental, Social and Governance (ESG) reports allow analysts to work out how seriously businesses they are considering investing in take issues such as climate change, water use, human rights practices and political contributions.
Aviva argue that companies who withhold information from investors ‘that is important for the assessment of medium to long term risk and value’ impose a cost on the markets and undermine its effective functioning.
Industry experts we have spoken to estimate that nearly 80% of major businesses compile a form of ESG reports – but a major problem is that there are no legal standards – so they vary in clarity and usefulness.
Some reports were described as so ‘complex and long analysts cannot read them’, while most were compiled ‘for the sake of a report rather than for the business’.
Speaking at an All-Party Parliamentary Group meeting in London – Waygood said that attempts to block Aviva’s vision for comparable, transparent and relevant ESG reports – backed by Thompson Reuters, Schroders, Hermes and F&C – had left him deeply frustrated.
“Because we were part of the process for so many months I can tell you that the people blocking us were Canada, New Zealand, Australia, Kazakhstan and more than anything the US Chamber of Commerce,” he said.
“If we do not resolve the US Chamber of Commerce, which is not democratically accountable, we will not get any action that applies from a UN process from any treaty.
“They simply undermined everything – they are recalcitrant and they exist to undermine in their words ‘anything that applies to US business’ and I am very happy to be able to say that here.”
The US Chamber of Commerce did not respond to RTCC’s request for a comment.
In a further email exchange Waygood added: “In my view lobbying against such a proposal represents the worst form of lowest common denominator trade body interference in the development of a more sustainable economy.
“It appears to be based on short term thinking and an almost reflex action against any policy measures that shape the future of business.”
Brazil, Mexico, South Africa, Norway, Switzerland, France and the UK have all been supportive of the proposals – with the conclusions from narrative reporting discussions expected later this year.
Some governments are taking action on a national level to improve the quality and quantity of information available.
UK Deputy Prime Minister Nick Clegg used his platform at Rio to reveal that all companies listed on the on the main market of the London Stock Exchange will have to report their greenhouse gas emissions annually – a move that was welcomed by green groups who had been pushing for this measure for years.
And despite Aviva’s proposal hitting the wall in Rio, Deloitte partner Guy Battle told RTCC the markets will ultimately force all businesses to compile clear and comprehensive ESG reports.
“What was interesting about the first week of Rio was the enthusiasm with which business was acting [in this regard]”, he said. “There was a lot of discussion about reporting.”
“We have to move towards a form of Radical Transparency. Companies have to realise that we are living in a world where Radical Transparency is a good thing.
“It’s good for the investment community as they can see the opportunities and the risks. It’s a test of how efficient you are as a business.”
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