Investors increasingly consider ESG (Environmental, Social & Governance) factors as part of their decision making and engagement processes. The ESG Disclosure Score is a percentage figure that represents your aggregated level of disclosure against quantitative ESG data points drawn from global standards, that are considered to be most relevant for your industry.
Issuers are responding with greater levels of transparency and disclosing more data, often applying global standards that were created to facilitate consistent disclosure in particular areas of investor focus, such as GRI (Global Reporting Initiative) and SASB (Sustainability Accounting Standards Board).
In addition, there is a growing variety of regulatory requirements across many countries and well as surveys requesting further information that are sent to companies by investors and assessment organisations.
As one of the largest exchanges in the World, with the most geographically and sectorally diverse issuers and investor base, London Stock Exchange has been helping issuers navigate the disclosure landscape for many years, for example by:
- Chairing the UN Sustainable Stock Exchange Model Guidance on ESG Reporting;
- Launching LSEG’s own Issuer ESG reporting guidance; and
- Making available to issuers their FTSE Russell ESG Ratings, developed for investor clients.
The ESG Disclosure Score builds on this support by providing a mechanism by which issuers can better assess their current levels of quantitative ESG disclosure relative to industry sector average and understand which additional metrics could be disclosed to help give investors a clearer picture.
The mechanism is intended as a tool for issuers to consider good practice in disclosure of key quantitative ESG metrics, by providing an indication of the most relevant ESG metrics in the issuer’s industry sector and showing how their quantitative disclosure across these areas compares to industry peers.
The score is a percentage figure that represents the aggregated level of disclosure against certain quantitative ESG data points drawn from global standards, used by FTSE Russell and that are considered to be relevant for the issuer’s sector.
It does not represent any judgement on the nature of the disclosure i.e. whether specific policies or figures on emissions or diversity etc. are good or bad – investors will determine this for themselves. The score simply reflects that data is being disclosed providing an indication of transparency to investors. Individual scores are not made public: they are provided only to issuers along with the average and top scores in their industry for comparison.
The ESG Disclosure Score is an additional tool provided by London Stock Exchange for its issuers: there are no additional mandatory requirements. Given the growing importance of ESG data to investors, it is hoped that the ESG Disclosure Score will prove helpful in considering increased disclosure on key quantitative ESG metrics.
It is important to note that good reporting goes much wider than the key quantitative metrics that are covered here and issuers should review the Guide to issuer ESG reporting for more comprehensive guidance.
Benefits for issuers:
• Highlights key sector-material ESG metrics for considering disclosure areas that may be improved.
• Improved understanding of relative performance in ESG disclosure compared with peers
• An opportunity to use this knowledge and information to enhance dialogue with investors that have a focus on ESG disclosure and performance
Benefits for potential issuers
• Benefit from ESG disclosure tools and support aligned with globally recognised ESG disclosure standards and methodologies used by FTSE Russell, providing the opportunity to achieve good practice in quantitative ESG data disclosure ahead of IPO
Benefits for investors:
• Issuers are more aware of the materiality of ESG matters in their industry and provided with information that may help them to improve disclosure on key areas of interest.
More information visit www2.lseg.com
