Sustainability Reporting and ESG Compliance: A fiduciary’s Guide to Navigating the Changing Landscape
Explore the growing pressure on businesses to embrace sustainability and ESG principles as a fiduciary duty.
In a world facing multiple challenges, including population growth, resource scarcity, climate change, and social justice issues, businesses find themselves at the epicentre of change. Every decision made by companies, regardless of their size or industry, carries consequences—social, environmental, economic, and reputational—that eventually affect us all. In recent years, there has been a growing awareness among businesses that they must lead the way in addressing these challenges through Environmental, Social, and Governance (ESG) practices.
The Growing Pressure on Businesses
As businesses navigate this complex landscape, they are under increasing pressure to adopt ESG principles. Customers and investors alike are demanding more from the companies they engage with. Consider these statistics: 80% of investors now consider sustainability criteria in their investment decisions (FTSE Russell), 71% of consumers prefer to support brands committed to climate action (IBN Institute for Business Value), and 70% of employees are more inclined to work for companies with a genuine Corporate Social Responsibility (CSR) approach (Deloitte).
The Relevance to Fiduciary Businesses
For fiduciary businesses, the integration of ESG standards is not just a choice but a duty. The United Nations Environment Programme Finance Initiative (UNEP FI) released a report in 2019 that underscored the critical importance of incorporating ESG standards into regulatory conceptions of fiduciary duty.
In their 2019 report, the United Nations Environment Programme Finance Initiative (UNEP FI) concluded that: “there is extensive evidence showing the critical importance of incorporating ESG standards into regulatory conceptions of fiduciary duty. Investors who fail to incorporate ESG issues are failing their fiduciary duties and are increasingly likely to be subject to legal challenges.”
Due to the evolving expectations and responsibilities placed on investors, particularly in the context of responsible and sustainable investing, investors are now expected to:
1. Incorporate financially material ESG factors into their investment decision-making.
2. Understand and incorporate the sustainability preferences of beneficiaries/clients.
3. Be active owners, promoting high ESG standards in the companies they invest in.
4. Support the stability and resilience of the financial system.
5. Disclose their investment approach transparently, including how preferences are incorporated.
These changes reflect a broader shift in the investment landscape where ESG incorporation is the new norm, ESG issues are recognised as financially material, and regulatory frameworks are evolving to mandate ESG incorporation.
Sustainability Reporting Standards
To navigate this evolving landscape, fiduciary businesses must understand the relevant sustainability reporting standards. These include frameworks such as the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), and the Task Force on Climate-related Financial Disclosures (TCFD). Adhering to these standards is essential for transparent and accurate reporting.
True offers a tech-driven sustainability consultancy, customising services to your organisation's unique needs and goals. They provide guidance, UN SDG impact assessment with Paragon Impact, carbon footprint management with Greenly, verification of environmental metrics, CSR impact maximisation through Uniti, and comprehensive sustainability training. True's solutions support businesses on their sustainability journey and foster responsible practices.
Accessing Information on Portfolios/Business
In addition to offering consultancy services, True assists clients in accessing crucial information about their portfolios. This includes daily monitoring of financial performance as well as insight into sustainability performance, including ESG risk, UN SDG impact, climate compliance, and regulatory adherence.
Strategic Consultancy for Sustainable Transformation
True's strategic consultancy services assess ESG risks, help organisations set sustainable strategies and operational targets, and facilitate sustainability transformation. True also assists in crafting compelling sustainability messages that reflect your business while mitigating the risk of accusations of greenwashing.
In conclusion, the pressure on businesses to embrace sustainability and ESG principles is growing. Fiduciary businesses, in particular, must recognise that these changes are not just a matter of choice; they are a fiduciary duty. True offers a comprehensive suite of services to help businesses integrate sustainability into their operations, monitor performance, and navigate the complex world of ESG regulations. Embracing sustainability today is not just a responsible choice but a strategic imperative for businesses looking to thrive in a rapidly changing world.
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TrueESG exceed expectations with their expertise and high-calibre team.
As an innovative partner, their advice enables us to drive meaningful and positive change across our business to drive better outcomes for our clients' success. They demonstrate a genuine commitment to action, walking alongside Altum's ESG journey every step of the way.
Altum Group CEO