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ESG Monitor 2020: Reporting is becoming more professional, but shortcomings remain

Last updated Dec 18, 2020 at 3:13PM | Published on Dec 18, 2020 | Uncategorized

An unified view is lacking: rating agencies, frameworks and studies try to establish comparability between companies on the topic of ESG, but they all set a different focus. That’s why cometis teamed up with market research institute KOHORTEN to take a more comprehensive look at ESG reporting.

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Agencies that do ESG ratings, such as MSCI ESG, Refinitiv or Sustainalytics, look primarily at corporate reporting. Their benchmark is: Are certain ESG issues being reported on or not? Accordingly, they then put a tick on their checklist or, if not mentioned, not at all. On the other hand, ESG frameworks such as GRI, TCFD or SASB are often only rough guides for the reporting itself.

A more holistic view of ESG reporting
We have therefore developed the ESG Monitor 2020 together with the market research institute KOHORTEN to analyze and compare corporate ESG reporting more comprehensively and to identify general problem areas. The ESG Monitor focuses primarily on the following objectives:

  1. to analyze the status quo of current reporting and thereby draw more attention to quality issues in ESG reporting. The focus is on transparency, comparability, relevance, completeness and measurability.
  2. to examine the issuer perspective on the challenges of ESG reporting. In doing so, the ESG Monitor also highlights the opportunities and challenges associated with ESG reporting on the issuer side.

For the ESG Monitor 2020, a team with financial market experience analyzed the ESG reporting of 87 DAX and MDAX companies in the 2019 reporting year. The data collection tool developed specifically for this purpose comprised around 180 survey points, according to which the companies’ reports were evaluated. The survey questions were, for example: In what form do the DAX and MDAX companies report in terms of format, concept, scope, language of publication or deadline? Which topics are included in the report? How important is the comprehensibility and measurability of ESG information in reporting?

The big problem: What does sustainability actually mean?
We found that while ESG reporting has become more professionalized, it still has not solved the fundamental definition problem. Certainly, progress has been made on substantive requirements. For example, frameworks such as that of the Global Reporting Initiative (GRI) are now used as standard for better guidance. External auditing of reports has also become the rule rather than the exception, and more and more board members are addressing the issue of sustainability. But: across industries, many still do not know exactly what sustainability actually is. This lack of comparability is also one of the biggest problems with ESG reports, not least because the quantitative data is usually still very inadequate.
As a consequence, it often still appears that only what is expected by certain ESG rating agencies is reported. As a result, companies hardly ever discuss what their own ESG focus topics are and prefer to keep quiet about concrete, ambitious goals. This gives the impression that many sustainability reports still tend to be used to give the company an environmentally friendly and responsible image, without also providing countable facts in return. This means that the ultimate goal of data-based reporting, which is to improve the company’s financing options with ESG-savvy investors (and they are growing in number!), is still overlooked by many companies.

Award-winning: The ESG Monitor 2020. Will be even better: The new edition 2021!
The intensive and detailed examination of the ESG reports of DAX and MDAX companies has paid off: the ESG Monitor 2020, created by cometis in close cooperation with KOHORTEN, won the gold Best Practice Award in the category “Agency Self Promotion” at this year’s PRGN Contest, beating off strong international competition.
And now the ESG Monitor is entering its second round – results for the 2020 reporting year are expected early next year. Stay tuned!

Michael Diegelmann

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