Check Out Your Stock's ESG Report Card
Kiplinger's Personal Finance|October 2021
A sustainability report offers insights into progress toward environmental, social and corporate governance goals.
Adam Shell

THOUGH NOT EXACTLY PAGE turners, corporate sustainability reports are must reads if you want to align your investments with your values. A sustainability report goes beyond traditional financial numbers to highlight a company’s ESG goals and practices, such as steps taken to reduce carbon emissions, close the gender pay gap or boost the number of minorities on the board.

The report also identifies the ways that broad ESG trends may impact a firm’s long-term strategy and outlook, letting stakeholders know the risks and opportunities around ESG, says Maura Hodge, national ESG assurance leader for accounting firm KPMG. “Readers should look to see if the company has embedded ESG into its core business activity,” she says.

A firm’s ESG record has emerged as a key input when choosing investments. U.S. asset managers now manage more than $17 trillion using ESG strategies, up 42% from the start of 2018, according to the Forum for Sustainable and Responsible Investment. And investors are pressuring firms to provide more data and transparency around ESG. Nine out of 10 S&P 500 companies now publish sustainability reports, up from 20% in 2011, according to the Governance & Accountability Institute, a sustainability consulting firm.

Currently, sustainability reports are published voluntarily and measure progress on ESG goals based on standards and metrics developed by nonprofits and independent groups, such as the Value Reporting Foundation, which oversees the Sustainability Accounting Standards Board (SASB). The Global Reporting Initiative (GRI) and the Task Force on Climate-Related Financial Disclosures (TCFD) are others.

These reports, however, aren’t required or bound by disclosure rules set by regulators such as the Securities and Exchange Commission. Thus, they lack the standardization (think clarity, consistency and comparability) found in accounting.

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