U.S. companies can legitimately claim "survey fatigue" as investors and money managers seek more information about how ESG issues and risks are addressed, but there is also a need for getting more uniform information back to the investors, industry observers said.
Currently, companies deal with competing standards for disclosure of ESG data, which in turn can be equally confusing for investors trying to assess the ESG risks they care about for the companies in which they invest. The end result can be lots of time spent by investors, companies and ESG advocates trying to get critical risk management information to figure out what it means for long-term performance.
"Investors are still figuring out what the best information is," said Emily Kreps, global director of investor initiatives with CDP, a non-profit that runs a global disclosure system, where more than 7,000 companies answer detailed questions about how they address and prepare for environmental impact and supply chain issues. While initially focused on corporate equities, the program has grown to include information useful for evaluating corporate bonds.
In 2019, more than 525 investors with $96 trillion in assets were CDP signatories, up from the 35 investors that signed up for the first questionnaire in 2002 asking 500 of the world's largest companies about climate change. Today, more than 7,000 companies worldwide respond, with the highest number being U.S. companies, including 70% of the S&P 500.
"The important part of the disclosure process is that it asks all companies to respond to the same question, which allows for comparison," said Ms. Kreps.
The information disclosed has triggered a proliferation of scores and ratings that are derived from it, including from asset managers creating their own data systems, she said. "That can lead to investors saying, 'What am I supposed to be looking at?'" To answer that, CDP and other groups are working to make it easier to align reporting requests to companies and to get the most relevant metrics for investors, she said.