London Stock Exchange Group PLC (LSE) has issued new detailed guidance for issuers and investors on Thursday that sets out recommendations for good practice in environmental, social and governance (ESG) reporting.
The guidance comes in response to investor demand for greater consistency from companies in reporting their adherence to socially responsible practices.
“The global guide responds to demand from investors for a more consistent approach to ESG reporting, which is now a core part of the investment decision process,” the LSE’s guidance states.
The guidance aims to make companies more aware of the importance of providing high-quality ESG information and engaging investors on sustainability-related issues; enhance dialogue between issuers and investors; help investors make more informed investing decisions; and support the development of global reporting standards.
The guidance was developed after consultation with companies of all sizes listed on the LSE’s exchanges and dialogue with investors and asset managers “to understand the key challenges that face the industry in regards to ESG reporting.”
The guidance is also modelled on industry standards such as the Financial Stability Board’s recommendations for climate-related disclosures and the United Nations’ Sustainable Development Goals, the LSE notes.
“The area of sustainable investment has changed dramatically, with consideration of ESG factors now seen as standard for most large institutional investors,” the LSE reports.
“This guide is specifically focused on improving the dialogue and information flows between issuers and investors, which will in turn benefit the market as a whole, as good practice in ESG becomes more and more relevant in the investment chain,” says Raffaele Jerusalmi, CEO of Borsa Italiana and director of capital markets with LSE.
“FTSE Russell is increasingly working with asset owners and fund managers worldwide to build ESG considerations into their equity benchmarks,” adds Mark Makepeace, CEO of FTSE Russell and director of information services with LSE. “It is vital that investors are able to measure and capture their exposure to ESG risks and opportunities and the launch of LSEG’s guidance today will help companies understand what good ESG reporting looks like.”