How do environmental, social and governance (ESG) risk disclosures affect potential investment in a business – and how the company is perceived by investors and stakeholders? A study by Financial Executives International, in collaboration with Donnelley Financial Solutions, tells companies what investors want to know and what they should be disclosing.

The report – Transparency or greenwashing – came to the following conclusions:

• investors want ESG information and are obtaining it from many different places;
• having a sustainability programme and/or producing a CSR report are not the same thing as having a sustainable business strategy;
• companies need to determine the most important sustainability and ESG issues for creating long-term value in their businesses;
• big data is about to collide with sustainability and ESG to a large extent.

One of the investment managers interviewed in the study said: “Transparency plays a major role in driving increased investor interest in ESG topics.”

Another added: “As investors, we’re focused on identifying companies with long-term, sustainable business models. and more often than not, you can determine whether a company is truly focused on creating long-term value by looking at its approach to key ESG issues.”

Read more and download the full report here.

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CTMfile take: Disclosing environmental, social and governance risks is becoming an increasingly prominent issue for companies and the impact of ESG on financial statements is an area of growing importance to investors.