ACSI CEO Ann Byrne

15 May 2013 — Companies producing high-quality sustainability reports have more women on the board, provide more certainty to investors and have better environmental, social and corporate governance, says a report that named Mirvac, DEXUS and GPT as leaders in the field.

The Australian Council of Superannuation Investors report, Corporate Reporting in Australia – Disclosure of Sustainability Risks Among S&P/ASX200 Companies, found that while there had been improvement in companies’ reporting practices overall, almost half of ASX200 companies still did no sustainability reporting, or only had basic reporting.

ACSI chief executive officer Ann Byrne said the extensive impact environmental, social and governance risks had on the long-term viability of companies made sustainability reporting a crucial issue for investors.

“To enable investors to effectively price and manage risk during their analysis of an investment, there is a need for relevant information, and companies must understand the form that information should take – commensurate with the risks specific to their industry sector,” she said. “It must be meaningful, accurate, timely and comparable data to help investors identify and manage their exposure to ESG investment risks.”

This year ACSI named companies who had continued to outperform their peers, and shamed those who had consistently underperformed.

Three companies in the property sector – Mirvac, DEXUS and GPT – were listed as leaders, having sustainability reporting rated as “comprehensive” for at least four years. Only one property company – Abacus Property Group – was listed as a laggard, failing to produce a sustainability report for at least four years.

Findings also showed a correlation between reporting practices and other ESG factors, including:

  • Fewer women on the boards of companies with poor sustainability reporting practices
  • A high correlation of ACSI voting against board endorsed resolutions where a company has poor sustainability reporting
  • A higher percentage of ACSI and broader market opposition to remuneration practices in poor reporting companies
  • Companies that better disclose ESG risks are rated by external research providers as having better ESG management practices

The ACSI report comes as local research finds that higher quality sustainability reporting supports higher company value, as measured by cost of capital and expected future performance.

Firm Value and the Quality of Sustainability Reporting in Australia, published in the Australian Accounting Review, provides the first quantitative evidence of a link between Australian companies’ sustainability reporting practices and their value.

“From a reporting entity’s perspective, the fact that markets appear to reward meaningful sustainability disclosures, even where those disclosures may include the reporting of cash outlays, may induce more widespread adoption of comprehensive sustainability reporting,” the study authors said.