2011-08-05   Source: Financial Standard

Australian companies will be under pressure to publish their environmental, social and governance risk under a new reporting guide launched today.

The Financial Services Council (FSC) and the Australian Council of Superannuation Investors (ACSI) have teamed up to produce the ESG Reporting Guide for Australian Companies.

The guide includes essential information and data that super funds and fund managers would use to assess ESG investment risk, although companies will only be asked to report those risks relevant to their business.

According to Ann Byrne, chief executive officer of ACSI, 15% of ASX 200 companies currently report no ESG risk, while 53%'s reporting is rated as 'basic', which often constitutes occupational health and safety risk only.

Construction, energy and manufacturing sectors are currently among the worst offenders, while mining and financials generally fare better.

Although this is a voluntary guideline only, ACSI and analysts will put pressure on all businesses to adopt the guidelines over time as investors increasingly look to ESG factors as a key component of investment decisions.

"It shouldn't have to become compulsory because it is simply good business for the companies and for the super funds and fund managers to have access to this data," said John Brogden, chief executive officer, FSC.

Brogden said that the study into this, which began in February 2010 and included consultation with analysts and Australian company directors, found that "super funds and fund mangers believe there is too little ESG information from too few players."

"We are confident that this will be embraced over time. It won't happen over night but I think within 5 years we will see well over 75% of companies embracing this."

The guide help companies assess the key components and streamline the reporting process, which will also enable retail investors to better asses ESG risks.

"We hope the guide will bridge that gap in understanding ESG reporting is not just a 'nice to have' but an essential indicator of the stability of your business," said Byrne.