Investor groups call for “coherent vision” from ESG standards bodies

New discussion document written by PRI’s Douma and ICGN’s Dallas

A group of investor bodies including the Principles for Responsible Investment and the International Corporate Governance Network has called for a “coherent vision” from ESG standards bodies like the CDP and the Sustainability Accounting Standards Board (SASB).

It’s one element of a series of suggestions, including greater standardisation around corporate ESG disclosure, from a new initiative called the Global Investors Organisations Committee, or GIOC.

GIOC’s members – alongside the PRI and ICGN – are Ceres, the CFA Institute, the Global Impact Investing Network (GIIN), the Global Sustainable Investment Alliance (the group of SIFs) and the UN Environment Programme Finance Initiative.

They have contributed to a new discussion paper written by the PRI’s Kris Douma and George Dallas of the ICGN called Investor Agenda for Corporate ESG Reporting.

The paper says investors would benefit from the members of the Corporate Reporting Dialogue, a group set up to promote coherence in ESG frameworks, “proactively articulating” how they “fit together”.

The eight members of the Corporate Reporting Dialogue are CDP, the Climate Disclosure Standards Board (CDSB), Financial Accounting Standards Board (FASB), the Global Reporting Initiative (GRI), International Organization for Standardization (ISO), International Financial Reporting Standards (IFRS), International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board.

The Dialogue was set up in 2014 in a response to market demand for “greater coherence, consistency and comparability between corporate reporting frameworks, standards and related requirements”. It’s housed within the IIRC.Four years on and the new PRIICGN paper says that while the investors support better coordination of existing frameworks rather than creating new ones, it is “incumbent on the standard-setting organisations to present a coherent vision of how these standards can and should fit together”.

But it acknowledges that there is “no single solution – one set of metrics or a single framework – that will satisfy all users of ESG data”.

“We recognise that the pace of change is sometimes slow.”

RI understands the IIRC – which recently named former McKinsey managing partner Dominic Barton as its chairman – is working on preparing what’s being termed a “major alignment project” between different reporting frameworks. Spokespeople for the Dialogue weren’t immediately available.

The paper also calls on securities regulators to “come together to codify industry and sector specific” key performance indicators (KPIs) for ESG factors, making use of the work done by the GRI and SASB etc. It sees “significant efficiency gains” from a set of industry specific KPIs and adds the GIOC members would be happy to help in this exercise.

The paper, which also touches on the legal aspects of ESG assurance and coins the term “R3” (‘return, risk and real-world impact’), concludes: “We hope that our investor perspective is useful and we recognise that the pace of change is sometimes slow.”

But it hopes it provides “some foundations for moving forward” and helps build the dialogue between institutional investors and the standard setting communities.