MORE THAN 50 INVESTOR GROUPS, SOCIAL INVESTMENT FORUM URGE SEC TO REQUIRE ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) DISCLOSURE

BY: SOCIAL INVESTMENT FORUM

Requests Mandated Reporting Based on Global Reporting Initiative (GRI) Guidelines; Current Financial Woes Linked to Lack of Transparency.

WASHINGTON, D.C. - More than 50 major investment firms and professionals joined the Social Investment Forum (SIF) today in calling on the Securities and Exchange Commission (SEC) to help strengthen financial markets and foster sustainable business practices by requiring publicly traded companies to report annually on a range of environmental, social and corporate governance (ESG) matters. 

The organizations are asking the SEC to require companies to report:  (1) annually on a cohesive set of sustainability indicators in accordance with the most up-to-date reporting framework of the Global Reporting Initiative (GRI); and (2) on other material ESG matters as they come to light. 

The full text of the SIF letter and the list of signatories can be viewed at http://www.socialinvest.org/documents/ESG_Letter_to_SEC.pdf .

 In the letter to SEC Chairman Mary Schapiro that accompanied the proposal, the investors said:  “The present global economic crisis has made it readily apparent that our existing system for corporate reporting has failed shareholders. We believe that robust sustainability reporting could have mitigated some of the impacts of the financial crisis. These types of disclosures would have promoted longer-term thinking by investors and corporations, and earlier detection of predatory lending and other destructive business practices.  There is a tremendous opportunity to learn from these gaps and to construct a system of safeguards to protect investors. We are confident that mandatory sustainability reporting will contribute significantly to rebuilding public trust in corporations as well as the agencies regulating them in the wake of the present crisis.”   

SIF CEO Lisa Woll said:  “Despite the growing evidence that companies’ management of environmental, social and governance issues is material to their financial performance and sustainability over time, this reporting is not happening today, and enforcement of existing disclosure requirements in the United States is lacking.  That is why SIF, representing investors who encourage corporations to improve their practices on environmental, social and governance issues, is asking the SEC to require sustainability reporting for publicly traded companies.” 

Among the signers is Ceres, a leading coalition of investors and environmental groups that has been working with many of the nation's largest investors to persuade the SEC to issue guidance on ESG disclosure companies should be providing.  "Institutional investors need standardized, comparable reporting on ESG risks and opportunities to integrate this information into their investment decision-making," said Ceres President Mindy Lubber. "Only with clear SEC guidance on ESG matters can investors avoid costly financial risks in their portfolios.”

The Interfaith Center on Corporate Responsibility (ICCR), a coalition of nearly 300 faith-based institutional investors representing over $100 billion in invested capital, also endorsed the proposal.  ICCR Executive Director Laura Berry said:  “For nearly 40 years, ICCR members have advocated for deeper, broader disclosure of environmental, social and governance issues, recognizing their materiality as indicators for predicting future value and as proxies for sound management practices.  As the SEC responds to the challenge of financial reform, disclosure by companies of sustainability risks and investor analysis of the impact of these factors on future valuation of publicly traded securities is essential to enhanced share performance across all sectors of corporate activity.”

The proposal notes that several trends are converging that speak directly to the need for a mandatory ESG disclosure rule in the United States:

·         An increasing number of investors are integrating ESG factors into their investment decisions and requesting greater disclosure from companies through voluntary initiatives and shareholder proposals.

·         Recent legal opinions have come around to the position that consideration of ESG factors in the investment process is not only permissible but also arguably mandatory for fiduciaries. 

·         Several governments and regulators outside the United States—including those in France, Sweden and the United Kingdom—already require corporations to disclose various ESG factors.

·         A mounting volume of literature points to links between ESG factors and corporate financial performance.

The submission to the SEC tracks the rise of investor interest in ESG issues.  One example it cites is the more than 560 global investment institutions with more than $18 trillion in assets under management that have signed onto the United Nations Principles for Responsible Investment since 2005.  As signatories these investors pledge, among other things, to incorporate ESG issues into investment analysis and decision-making processes.

In addition to the Social Investment Forum, the full list of signers on the SIF letter consists of (in alphabetical order): As You Sow Foundation; Boston Common Asset Management; Calvert Asset Management Company, Inc.; Center for Social Philanthropy, Tellus Institute; Ceres;  Christian Brothers Investment Services, Inc.; Congregation of the Sisters of St. Agnes; Corporate Governance (newsletter); Domini Social Investments; Dominican Sisters of Hope; Edward W. Hazen Foundation; EIRIS; Enterprising Solutions; Ethos Foundation; First Affirmative Financial Network, LLC; Friends Fiduciary Corporation; Funding Exchange, Inc.; Governance & Accountability Institute; Green Century Capital Management, Inc.; Investor Environmental Health Network; Interfaith Center on Corporate Responsibility; IW Financial; KLD Research & Analytics, Inc.; Krull & Company; Manhattan Country School; Marc J. Lane Wealth Group; Marianist Province of the United States; Merck Family Fund; Mercy Investment Program; Miller/Howard Investments; Northwest & Ethical Investments L.P.; Northwest Coalition for Responsible Investment; Outcrop; Oxfam America; Parnassus Investments; Pax World Management Corp.; Portfolio 21 Investments; Progressive Asset Management, Inc.; Region VI Coalition for Responsible Investment; RiskMetrics Group; Sisters of Charity of Cincinnati; Sisters of St. Francis of Philadelphia; Sisters of Mercy Regional Community of Detroit Charitable Trust; Sisters of St. Joseph of Springfield, MA; The Corporate Library; The Sustainability Group at Loring, Wolcott & Coolidge; Tides Foundation; Trillium Asset Management; Unitarian Universalist Service Committee (UUSC); Universal Health Care Foundation of Connecticut; Ursuline Sisters of Tildonk, U.S. Province; Veris Wealth Partners;  and Walden Asset Management.

ABOUT THE SOCIAL INVESTMENT FORUM: The Social Investment Forum (http://www.socialinvest.org) is the U.S. national nonprofit membership association for professionals, firms and organizations dedicated to promoting the practice and growth of socially responsible investing (SRI).  Critical to responsible investment practice is the consideration of environmental, social and corporate governance criteria in addition to standard financial analysis.  Nearly 400 SIF members support SRI through portfolio selection analysis, shareholder advocacy and community investing.