Stock exchanges around the world have this year announced new rules for the disclosure of non-financial information on environmental and social issues.
But weak enforcement mechanisms mean that most CFOs and Investor Relations Directors will opt out of following the guidance, according to a new report from independent analyst firm Verdantix.
The report benchmarks the non-financial reporting rules of ten stock exchanges around the world with combined market capitalization of $15 trillion representing more than 15,600 listed firms.
“The stock exchange announcement at Rio+20 generated extensive media interest in the potential for stock exchanges to drive disclosures on environmental and social risks” commented Abbie Curtis, Verdantix Analyst and author of the report.
“Our analysis identified ten stock exchanges with policies targeting non-financial reporting. Several of these are in emerging economies such as China and India, leaving behind larger rivals in Europe, Japan and the US.”
The Verdantix report “Stock Exchange Benchmark On Non-Financial Reporting Rules” assesses the ten most active stock exchanges globally on rules, policies, scope, current status, enforcement, penalties, format and frequency of non-financial reporting.
Stock exchanges covered are the Australian Securities Exchange, BM&FBOVESPA, Bombay Stock Exchange, Bursa Malaysia, NYSE Euronext Paris, Hong Kong Stock Exchange, Johannesburg Stock Exchange, London Stock Exchange , Shanghai Stock Exchange and Taiwan Stock Exchange.
Key findings of today's report include:
* Rules on social responsibility disclosures are prominent in emerging economies like India where investment in extractive industries can have significant impacts on local communities
* Integrated reporting of financial and sustainability performance has been spear-headed in South Africa by the King Code of Governance Principles
* Broader reporting of material environmental and social risks has been driven up the agenda by the Australian Corporate Governance Principles and Recommendations
* National legislation requiring environmental disclosures in the French market requires firms listed on NYSE Euronext to report against 42 Environment, Social and Governance indicators
* From April 2013, 1,800 firms listed on the London Stock Exchange must disclose GHG emissions data due to a new UK government regulation implemented by the LSE.
“Despite this flurry of activity, we found that even firms listed on stock exchanges with comprehensive non-financial reporting guidance do not face financial, legal or reputational penalties for non-disclosure” commented David Metcalfe, Verdantix CEO.
“Furthermore, industry titans like NASDAQ and NYSE do require complete disclosure on ESG risks. Without broader applicability and stricter enforcement most CFOs and Investor Relations Directors will dodge the bullet and rely on the head of sustainability to conduct blocking and tackling when investors request data.”