ASX 50 companies fall behind global peers for ESG transparency
Australian companies’ environmental, social, and governance (ESG) reports are less transparent than those from Europe and, to a lesser extent, Asia, according to research.
In an assessment of the largest 197 companies on four major stock exchanges, the Global ESG Monitor: Australia report for 2022 found Australian companies were more transparent about their key non-financial risks, operating environment, and use of climate related recommendations and frameworks.
However, they were less clear about indicators for measuring progress, their use of and impacts on nature, and their processes for managing critical sustainability concerns inside the company.
“The results of the ASX 50 are evidence that many companies are transparent in their non-financial reports and that they want to cover the topics as a whole. Overall, however, reporting could be more detailed and more specific in terms of targets, formulas and key figures,” the report stated.
“It is becoming clear that ASX 50 companies are well advised to check the degree of fulfilment of the referenced frameworks being achieved in their reports, in order to avoid the impression of cherry picking or worse, greenwashing.”
Endeavour Group Ltd received the highest score among ASX 50 companies for its ESG reporting. Australian and New Zealand Banking Group Ltd (ANZ) and Newcrest Mining Ltd were in second place, followed by a tie between QBE Insurance Group and Woodside Petroleum Ltd.
The lowest-ranked companies were Reece Ltd, the Australian Foundation Investment Company Ltd, and Magellan Global Fund (Open Class).
The global monitor analysed ESG reporting transparency in terms of relevance, timeliness, reliability, accuracy, balance, and comparability.
Australian companies’ scores, while less transparent than Europe (66) and Asia (56), had the same average score as those from the US at 53 out of a possible 100.
Some 79% of ASX 50 companies referred to the Sustainable Development Goals (SDGs) of the United Nations (Agenda 2030) as a framework.
According to Paterson, the biggest differences in transparency between Australian and high scoring European companies was “Europeans provide more information about calculation methods, the monitoring of targets and milestones and their integration into everyday business.”
He stated: “Investors, regulators, workers and customers are demanding greater transparency about how companies are managing the non-financial impacts from and risks to their operations. The 2022 Global ESG Monitor: Australia aims to help companies improve the transparency of ESG reporting and help stakeholders to hold companies accountable for their non-financial risks and impacts.”
He added that while the study measured what companies disclosed about their ESG efforts, it did not measure the outcomes.
“Should we be wary of those companies with low scores for transparency? Maybe. At the very least we should be asking: Why are they not disclosing as much as they could be?” Paterson said.
AUTHOR
Rhea Nath
Recommended for you
Perpetual has released its Q2 fund flows showing a fall back into outflows after a positive Q1, as well as an update on its planned deal with KKR.
Magellan has announced a raft of executive changes including the departure of head of investments Gerald Stack after 18 years and a second appointment from Maple-Brown Abbott.
Morningstar research of seven active Australian asset managers has found they are expected to see client redemptions averaging 3.1 per cent of their FUM per annum through to FY29, with two forecast to lose more than 10 per cent.
Franklin Templeton is to get rid of its Martin Currie branding and fold them into the wider group under ClearBridge Investments and Franklin Equity Group.
