ASX 50 Companies Fall Behind Global Counterparts in ESG Transparency
Research shows that the environmental, social, and governance (ESG) reports of Australian companies are not as transparent as those of European and, to a lesser extent, Asian companies.
The Global ESG Monitor: Australia report for 2022 looked at the 197 largest companies on four major stock exchanges and found that Australian companies were more open about their key non-financial risks, operating environment, and how they used climate-related recommendations and frameworks.
They were less clear about progress indicators, their usage and impacts on nature, and their internal systems for managing significant sustainability challenges.
“The results of the ASX 50 are evidence that many companies are transparent in their non-financial reports and want to cover the topics as a whole. However, reporting could be more detailed and specific in terms of targets, formulas, and key figures,” the report stated.
"It is becoming clear that ASX 50 companies would be wise to check the degree of fulfilment of the referenced frameworks in their reports to avoid the appearance of cherry-picking or, worse, greenwashing."
Endeavour Group Ltd. obtained the highest grade for ESG reporting among ASX 50 companies. The second position went to Australian and New Zealand Banking Group Ltd (ANZ) and Newcrest Mining Ltd, followed by a tie between QBE Insurance Group and Woodside Petroleum Ltd.
Reece Ltd., the Australian Foundation Investment Company Ltd., and Magellan Global Fund were the companies with the lowest rankings (Open Class).
The global monitor assessed the transparency of ESG reporting in terms of relevance, timeliness, reliability, accuracy, balance, and comparability.
While the scores of Australian companies were less transparent than those of Europe (66) and Asia (56), they had the same average score as those of the United States (53 out of a possible 100).
The Sustainable Development Goals (SDGs) of the United Nations (Agenda 2030) were used as a guide by 79% of the ASX 50 companies.
According to Paterson, the biggest difference in transparency between Australian and high-scoring European companies was that “Europeans provide more information about calculation methods, the monitoring of targets and milestones, and their integration into everyday business.”
He stated: “Investors, regulators, workers, and customers are demanding greater transparency about how companies are managing the non-financial impacts from and risks to their operations. The 2022 Global ESG Monitor: Australia aims to help companies improve the transparency of ESG reporting and help stakeholders hold companies accountable for their non-financial risks and impacts.”
He added that while the study measured what companies disclosed about their ESG efforts, it did not measure the outcomes.
“Should we be wary of those companies with low scores for transparency? Maybe. At the very least, we should be asking: Why are they not disclosing as much as they could be?” Paterson said.
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Source: Money Management
