Top ESG Reporting Trends for 2021

Top ESG Reporting Trends for 2021

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ESG Reporting trends are one of the popular topics in 2020. Although ESG reporting can be described as quite popular in certain settings, there is still a lot of grounds to cover. ESG reporting is the process whereby organizations share their sustainability journey with investors, lenders, and other stakeholders.

ESG reporting is also a practice that is bound to be improved in the nearest future. This is because ESG investing is becoming more established, much more than ever before. Investors now understand that the long-term financial performance of an organization is linked to its commitment to sustainability issues.

Since the ESG criteria cover the major sustainability issues, investors have particularly become interested in ESG reporting and ESG reports. Because of the increased interest of investors in ESG reports and reporting, organizations now pay more attention to them.

Thus, in 2020 and beyond, fine-tuning of the ESG reporting process should be expected. A well-detailed ESG report could easily win investors, especially ESG investors, over. It is important to mention that ESG reporting still largely lacks standardization. Although organizations and committees have been committed to guiding companies on proper ESG reporting, global, and national standardization, in a lot of settings, has not been achieved.

Also noteworthy is the fact that a notable proportion of investors have become interested in ESG reporting. This ESG include those that carry out detailed analysis based on the information publicly available. This category of ESG investors is known as active ESG investors. On the other hand, there are passive ESG investors. These are the investors that rely on the analysis made by reputable firms to decide about investing in an organization.

The impact of ESG reporting is noteworthy. Organizations that pay attention to ESG are getting a bulk of the available investments. For example, the assets managed by signatories to the Principles for Responsible Investment, which is supported by the UN, have grown tremendously. The value of assets managed by these organizations increased from about $22trn in 2010 to about $60trn in 2018. It s also noteworthy that about 60% of investments in the EU are managed with the integration of sustainability strategies.

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Trends in ESG reporting

These trends are aimed at improving ESG investing and ensuring that all parties involved apply reporting better. Here are the top ESG reporting trends for 2020.

The evolution of ESG reporting is very much expected in 2020. Even the efforts and commitment of organizations and committees to improving the quality of ESG reporting and standardizing the process, there is still a gap between what organizations release and what investors and other stakeholders expect. This is why active ESG investors engage in the extra process of analyzing information that is publicly available. ESG reporting will evolve because organizations will seek better ways of making reports relatable to stakeholders. To gain the attention of stakeholders and make them more interested in reports, tools such as infographics, videos, and graphs will be applied. ESG reports currently feature a lot of words. The creation of engaging reports is very much necessary, and this trend should unfold in 2020.

ESG reporting will be discussed in more boardrooms

The impact of ESG reporting on financial outcomes will only improve over time. Thus, ESG -related issues are going to be discussed in more boardrooms. Since the ESG criteria include the environment, social and governmental issues, to ensure that activities are socially responsible, these issues will be featured in more boardroom conversations. Boardroom conversations will broaden and focus on more than the investors. Issues such as gender diversity and proper employee compensation will feature more in boardroom conversations. Structures will also be established for ensuring that such issues are properly monitored and documented.

ESG reporting will gain impressive grounds

The reporting of ESG still has very limited reach, and standardization is still an issue. Although the standardization of ESG reporting is bound to take some time, more organizations will definitely embrace ESG reporting in 2019. Initiatives that encourage the transparency and reliability of ESG reporting will cause positive change, and better standards for transparency and reliability will be developed.

ESR reporting will be data-driven

ESG investing relies on data, in this case, financial and non-financial data, with more focus on non-financial data. Investors want to see growth and improved performance that is linked to sustainability. Companies will react to this request by developing reports that are backed by proper data. As a result, methods and tools for measuring the different criteria of ESG will be developed. Teams will also be specially created and tasked with managing and analyzing sustainability data.

ESG reports will include high-quality data

Investors’ interests in ESG data will increase in 2020. To ensure that investors are getting the information they need about their sustainability, companies will apply the best frameworks in reporting ESG. These are frameworks that guide the creation of ESG reports that contain important data that are financially material. With the frameworks, organizations can also create reports that can compete with those of peer organizations. The established frameworks include the SASB framework, which should receive more adoption in 2020. The simplicity of the standards will encourage easy adoption. Altogether, in 2020, a lot of organizations will strive to create high-quality reports to boost the confidence of existing investors and earn the trust of new investors. Strategies for executing activities related to ESG will be established.

Investors can look forward to a better understanding of the sustainability-related activities of companies in different sectors. The reach of ESG reporting will cut across different sectors, and ESG investing will be backed by extensive data.

ESG reporting will evolve in 2019 in ways that would be beneficial to the issuer as well as all stakeholders.

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