Investment Community Still To Be Convinced On Sustainability Reporting

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25th November 2009, 01:51pm - Views: 647





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Media Release



Wednesday, 25 November, 2009


SUSTAINABILITY REPORTING MUST PAINT CLEARER PICTURE


Sustainability information about companies has high credibility in the business and finance sector but there is still

confusion about the best way to report it, a CPA Australia survey of the investment community in key financial

centres has found.


Releasing the findings of the organisation’s latest report Valuing Sustainability Reporting, in Hong Kong, CPA

Australia President Richard Petty said there was clearly a demand for sustainability information but many

respondents to the survey were concerned about how well the information was disclosed.


“There are concerns that some of the reporting is unfocussed which dilutes its significance as a source of

information for making investment decisions about companies,” Professor Petty said.


“In the aftermath of The Global Financial Crisis, issues of sustainability are highly relevant to a company’s long-

term future and standing in the community.


“Investors are looking for sustainability information that is communicated with efficiency and clarity. Some critical

aspects, such as governance and environmental performance, are often obscured or need to be more

comprehensive and integrated with financial reporting.”


Prof Petty said the survey also revealed that while there were examples of excellent reporting, the investment

community needed to become more literate with many of the underlying principles and frameworks of

sustainability practice and reporting in order to capitalise on the information. 


Stockbrokers, investment analysts, fund managers and auditors in Australia, Asia and Europe were among those

surveyed.


The development of acceptable international standards and government leadership will be major  influences  on

further growth in sustainability reporting. 


Prof Petty said interest in sustainability information and the expected growth of socially and environmentally

based investments had not declined in the face of the global financial crisis.


“Indeed, the views from Hong Kong respondents points to future increases with 55% believing that there will be

growth in investor interest in these portfolios.


While financial reporting was still clearly seen as the main form of disclosure, there was a significant year-on-year

increase by Hong Kong respondents (34 to 49 per cent) in perception of investor interest in environmentally or

socially responsible investment portfolios. 


Stand-alone sustainability reporting was not necessarily the best way forward, with approval of this medium

dropping from 85% to 77% for Hong Kong respondents, and from 84% to 59% in the UK.


“Clearly the demand is for better integration with annual reports while the wider adoption of sustainability

reporting, with good governance at its core, has never been more important as it will enhance transparency and

accountability leading to better informed markets. 


“Sustainability reporting will lead to better corporate conduct in the financial sector, for example, as it promotes

a greater level of scrutiny of supply chains which encourages management to assess the inherent risks

associated with their financial products. 

 

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Other key findings include:


Australian respondents think financial reporting is twice as important as non-financial reporting;


51%  of Hong Kong respondents use sustainability reporting in risk assessment compared to 38% in

the UK and 29% in Australia;


76% of Hong Kong respondents see financial reporting’s past-performance orientation as a major

deficiency;


Hong Kong respondents scored the quality of financial services sustainability  reports at an average of

6.6 out of 10, while Australian respondents rated them at 5.6 out of 10.


General awareness of international sustainability frameworks and standards is not high.


The research follows

CPA Australia’s recommendation of

a three step action plan to business and political

leaders that can be implemented within the next 2-5 years:


1- Positive initiative from Governments to engage with the business sector and various regulatory agencies to

collectively determine the best way forward to facilitate in a non-prescriptive manner the uptake of sustainability

reporting.


2-

Development by the accounting profession of a clear understanding and articulation of the complementary

aspects of financial and non-financial reporting, and how, collectively, they build corporate performance and

market confidence.


3- A collective approach by the business community to develop understanding of the best and most efficient

mediums through which business sustainability performance and risk are communicated to the market and

users.


CPA Australia has established a formal relationship with the Amsterdam-based Global Reporting Initiative (GRI)

as part of its campaign. The GRI has pioneered the development of the world’s most widely used sustainability

reporting framework which sets out the principles and indicators that organisations can use to measure and

report their economic, environmental, and social performance.


Accountants

are fundamental to the development of sustainability reporting as they capture vital corporate

information which is used as a basis for organisational decision making. As the principle source of assurance,

accountants are also vital in promoting confidence in these emerging forms of disclosure. CPA Australia,

through its 122,000 members located in 100 countries, aims to promote the take up of sustainability reporting

and to mobilise the accounting profession to take a leading role.


Click here to view the survey report.


Media Enquiries:


Licardo Prince, External Affairs Executive, Ph: +61 3 9606 9746  Mob: +61 0401 777 917.











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