ESG Sustainability Reporting Metrics that Matter Most to Investor

ESG sustainability reporting has become an important denominator, especially for the investment community. From the perspective of the first UN Conference on Environment and Development (UNCED) and World Summit on Sustainable Development (WSSD), the focus taken for sustainability reporting was still too broad.

This is why regulators, governments, and reporting frameworks require companies to be more specific about the metrics so that stakeholders can make the right decisions. So, here are the main reporting metrics that investors are mainly interested in:

Why are ESG Metrics so Important? 

A quick check on statistics indicates that internationally, investors that focus on ESG sustainability reporting before making their decisions grew from 48% in 2017 to 75% in 2019. As an investor, a company that espouses the future of its operations has a better chance of crafting better short and long-term success strategies.

For example, if an investor wants to invest in the equity of a company like Samsung and hold on to the shares for ten years, the ESG report makes it easy for him/her to gauge the chances of getting a better return on investment.

Also, read Thinking of Investing? The Sectors to Watch Post-COVID 19

On the other end, companies reporting their sustainability efforts are sure of winning more resources for product development and growth from the interested investors. Furthermore, they also cut down the risk of corporate governance failure with a significant margin. For a new organization, this might be all that it needs to grow to the next level.

Remember that in addition to the metrics, which we are going to look at shortly, you need to understand the key principles, including materiality and accuracy that guide ESG sustainability reporting. Therefore, make sure to have good sustainability management software that allows you to gather the right information and create an easy-to-read report easily.

High-Ranking ESG Metrics for Investors 

When constructing their investment strategies, investors target identifying the best performers. So, if your company is a listed firm, you might have already seen the requirements for ESG reporting. Well, try to abide by them and, where possible, surpass the set standards to win the confidence of more investors.

In the recent World Economic Forum (WFF) that was held in September 2020, stakeholders released metrics that companies can focus on. The goal is to tell companies what to focus on for investors to come in and commit their resources. So, here is a comprehensive list of the main metrics that matter most to investors.

• People: As an investor, it is paramount to reflect on a company and how it treats its human resources. The goal is to evaluate how satisfied the employees are, their commitment, and engagement to the company. With a happy workforce, one is sure of better performance and profitability. Specific metrics to consider here are wage gaps, diversity, actual wages, and health and safety.
• Planet: This metric involves reflecting on a company’s dependencies as well as the implication on the natural environment. The aim of your company in ESG reporting should be helping to reduce the negative impacts that it has on the planet. Some of the main components of this metric include water use, land protection, and greenhouse gas emissions.
• Prosperity: This metric involves reflecting on how a company impacts the community’s well-being. Although you can also focus on other communities away from the main organization’s point of operation, most investors check the immediate neighborhood. Specific metrics under this category include taxes paid, research, development expenses, and wealth generation.

As you create your ESG reporting strategy, it is prudent to start by understanding the targeted stakeholder. For investors, the metrics we have highlighted above are the most critical. However, you might want to rope them along the process, especially when creating your plan. It is also a good idea to look at what others are doing to promote sustainability and focus on making your efforts more appealing.