CSR Reporting: What Investors Want

Who really reads CSR reports? Do investors really use them?  I heard speakers from Intel, the Global Reporting Initiative (GRI), Merck & Co., and CalSTRS offer differing answers to these questions during a panel on CSR reporting at the recent Financial Times Conference “Investing in a Sustainable Future.”

Merck’s Director of Corporate Responsibility Maggie Kohn seemed skeptical that CSR reports are reaching intended audiences.  She cited a Corporate Register report which identified investors as the third largest group of readers (12 percent), behind fellow CSR reporters and consultants and service providers.

But others were more upbeat about the value that CSR reports deliver to certain stakeholders, a feeling shared by Mike Wallace, GRI Director of Sustainability Reporting Framework groups. Investors are becoming a more important report audience, in light of developments.  Wallace cited growing evidence that investors are hungry for environment, health, and safety (ESG) metrics and GRI performance indicators. Financial information providers –- and CSR reports — are feeding that demand for ESG data.

A Virtuous Cycle

In mid-2009, the Bloomberg global financial information network launched a ground-breaking data service for its customers, providing new levels of transparency to investors.  By late 2009, clients using Bloomberg’s 250,000 data terminals had access to all publicly available ESG data from 2,000 to 3,000 companies.

“Eleven percent of assets under management are social responsible [investors who already use ESG data.]  Now the other 89 percent will get a chance to see this data.  Maybe they’ll dabble in it or even request the information from companies.”  It will become a virtuous cycle,” notes Emil Efthimides, manager of Bloomberg’s ESG Data Project.

And Bloomberg wasn’t alone in its acquisition of ESG data providers last year.
In mid-2009, KBC Asset Management, the largest structured funds operator in the Belgian market for institutional and private investors, acquired a subscription for the information solution of ASSET4 AG, the leading provider of objective and measurable environmental, social and corporate governance (ESG) information for professional investors and corporate executives. KBC Asset Management’s plan: to integrate the ASSET4 data into its in-house Sustainability Research Department’s on-going analysis and screening processes.

Thomson Reuters made its own investment in environmental, social responsibility and governance content  last year through the acquisition of ASSET4 AG. This deal was another step forward in the integration of ESG data into mainstream financial analysis.

Buy-side Investors Crave CSR Reports

So while Maggie Kohn of Merck observed that sell-side investors aren’t reading CSR reports, it appears that buy-side investors definitely are.

Two analysts from Goldman Sachs Asset Management Services who sat at my table confirmed that they absolutely rely on publicly available information as they research companies.  And, CSR reports fill a key role in providing the information they’re looking for.  When the data provided is structured according to GRI standards, so much the better.

Conspicuous by their Absence

Investors and analysts can now quickly scan through the ESG data available on their Bloomberg terminals, comparing companies side by side. For companies which opt not to publish CSR reports or disclose only limited data, their omissions will only become more obvious, notes Wallace.

“Companies have a choice,” noted Wallace. “They can leave a blank or they can fill it.”

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Cindy Mehallow is principal of CRM Communications, a woman-owned sustainability communications consulting practice specializing in corporate social responsibility reporting and stakeholder communications. GRI-Certified in sustainability reporting, Cindy has produced award-winning sustainability reports for Fortune 500 clients in a variety of industries.

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