In a press release issued last week, the United Nations Principles for Responsible Investment indicated a coalition of global investors is pressuring 29 laggard companies who have not published sustainability reports to keep their promises, while lauding nearly 90 companies who are identified as leaders in advanced level reporting.
A summary of the press release follows:
(London, 15 March 2012) – A coalition of global investors from 12 countries managing over US$3 trillion of assets today added its voice to increasing calls for better corporate reporting on environmental, social and corporate governance (ESG) activities.
The coalition of investors, all signatories to the UN-backed Principles for Responsible Investment, is writing to 118 UN Global Compact companies with a combined market cap of an estimated US$2.59 trillion, to either:
- welcome advanced-level reporting, or, conversely,
- challenge non-communicating companies to regain full participant status.
This is the fifth year that investors have engaged with Global Compact participant companies on the issue of transparency. Each of the 29 laggard companies, with a combined market cap of an estimated US$136.9 billion, are participants of the Global Compact, but have failed to produce the mandatory annual report that communicates their progress on corporate sustainability. The Global Compact recently announced that it has expelled 3,123 companies since 2005 for failure to communicate progress on their efforts to implement its ten sustainability principles.
From 2008 through 2011, the engagement resulted in an average 40.1 percent of laggard companies subsequently submitting their sustainability reports; this has included firms such as BHP Billiton, Aker Solutions, Severn Trent, Merck Kga, Oriflame Cosmetics, The Gap and LVMH. The status of all companies included in last year’s engagement can be found here.
In addition to writing to laggard companies, the investor coalition has acknowledged 89 leader companies with a combined market cap of an estimated US$2.45 trillion who have been identified as advanced-level reporters. These leaders include Novo Nordisk, Enel, Daimler, Nestle, Telefonica and Siemens. A full list of this year’s leaders can be viewed here.
Steve Waygood, Head of Sustainability, Research and Engagement at Aviva Investors, one of the investors involved in the coalition, said:
“Since we first proposed this initiative over five years ago it has gone from strength to strength, successfully encouraging some 40.1% of companies over the past five years to make good on their reporting commitments to the UN Global Compact. This bodes well for the discussions at the forthcoming UN Rio+20 conference in June, where corporate reporting on sustainability performance is appropriately high on the agenda of the 193 Member States that will be assembled.”
James Gifford, Executive Director of the PRI added,
“After the global financial crisis many investors believe that improved corporate disclosure of ESG issues leads to better risk management, good governance and enhanced transparency, all of which are necessary to protect long-term returns. Companies that would attract investors need to recognise this if they want to attract capital.”
Gavin Power, Deputy Director of the UN Global Compact added,
“Corporate sustainability implementation and disclosure both lie at the heart of the UN Global Compact. At the upcoming Rio+20 Summit, there will be an opportunity for governments and public policy makers to fully take stock of the rapidly evolving trends in business sustainability and responsible investment — with an eye towards creating new incentives to drive higher levels of sustainability performance and disclosure. We encourage investors to actively participate in the Rio+20 process, and welcome their contributions”.
The PRI and Global Compact initiatives are engaged in a number of mutually reinforcing activities, including an investor engagement urging companies around the world to sign onto the UN Global Compact. As of November 2011, this engagement saw 211 of the targeted companies join the Global Compact.