ESG Non-financial reporting standards

ESG RATINGS ON NON-FINANCIAL REPORTING AND THE RULES FOR OBTAINING THEM

The ESG rating shows the company’s level of preparedness for environmental, social and managerial risks. For investors and clients, it serves as an indicator of the prospects of cooperation with the corporation, as well as the profitability and profitability of potential investments. The standards allow us to assess the level of compliance of projects with modern requirements of a long-term strategy.

 

Key evaluation indicators when assigning an ESG rating to a company

 

 

 

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Basic standards for the formation of ESG reporting

 

1. Global Reporting Initiative (GRI)

Forms requirements for corporate, non-financial reporting in the field of sustainable development. Includes: anti-corruption, water conservation, biodiversity, occupational health and safety, emissions taxes. Allows companies to identify, collect and provide data in the environmental, economic and social spheres. According to the results of compliance with GRI requirements, they fall into the international database of non-financial reporting. This allows government agencies, market participants, investors, analysts and other interested parties to see the main non-financial indicators of the organization, assess its level of transparency, as well as compare the data provided with the declared values. Such accounting makes it possible to take real actions to improve the environmental situation and create social and economic benefits for the whole society.

 

2. Sustainability Accounting Standards Board (SASB)

The Council for Accounting Standards in the Field of Sustainable Development. He has developed 77 industry documents that define a minimum set of financially significant areas of sustainability and related indicators for an organization in a particular industry, based on its contribution to corporate development. Allows market participants to assess the industry’s exposure to risks.

 

3. GRESB

Assessment of portfolios in real estate and infrastructure for the implementation of sustainable development practices. Participants receive a qualitative study of business processes, a comparison with competitors, a roadmap with actions to improve their performance. The communication platform allows you to interact with investors and use GRESB data and analytical tools to monitor assets, interact with businesses and search for potentially profitable investments.

 

GRESB appeared in 2009 as the Global Real Estate Sustainability Benchmark. The real estate sector has been expanded to infrastructure facilities.

 

GRESB’s mission is to preserve and increase the value of assets by analyzing real estate and infrastructure projects for implemented ESG practices:

  1. balanced investments;
  2. elaboration of non-financial indicators;
  3. making decisions on the acquisition of an asset or abandonment of it.

 

GRESB Evaluation Participants and evaluation reasons

 

GRESB evaluates performance indicators in terms of environmental, social and managerial components, providing business intelligence tools.

 

For investors:

  • identification of monetization opportunities or identification of climate risk zones;
  • interaction with investment managers.

 

For companies, funds and assets: efficiency of facilities and investment portfolios.

 

 

The result is an analysis of the use of the best practices of environmental, social and managerial components.

 

GRESB Deadlines 2022 – by July 1 of this year, you must fill out a questionnaire and submit it for verification for consideration.

 

4. Carbon Disclosure Project (CDP)

Forms reporting requirements for investors, companies, and cities to manage their carbon footprint. An environmental impact disclosure system for solving environmental problems. The goal is to create a green economy by measuring and understanding the impact of business on the environment.

 

CDP is an international non-profit organization founded in 2000, based in the UK, which supports businesses and cities in data disclosure.

 

Evaluation participants:

  • Cities and regions
  • Companies of all industries

 

As a result of the evaluation of companies, a rating is awarded and reports are disclosed on the CDP website:

A -, A – market leader in addressing climate change challenges;
B -, B – level of climate risk and opportunity management;
C -, C – the level of awareness of setting climate goals;
D -, D – level of information disclosure “Fact for today”;
F – does not provide the required level of information disclosure;
Not available – The rating is closed by the decision of the company.

 

CDP Advantages:

  • 95% of large procurement organizations use or plan to use environmental indicators in procurement;
  • Purchasing organizations use metrics to compare suppliers;
  • Some buyers, such as L’Oréal, use the data to analyze the business of their suppliers, including from the point of view of their tasks to reduce greenhouse gas emissions;
  • Climate agency Cliometrics uses criteria when preparing its ratings;
  • Progress towards achieving carbon neutrality is assessed;
  • Analysis of the use of forest resources in the supply chain.

 

Reporting for 2022:

  • More than 680 investors with assets worth more than $ 130 trillion demanded that their counterparties disclose data through this mechanism;
  • More than 200 large buyers with a combined purchasing power of 5.5 trillion US dollars have asked their suppliers to provide information through this mechanism;
  • More than 13,000 participants reported through CDP on climate change, water security and forests;
  • More than 1,100 cities, states and regions have shown environmental information through this mechanism.

 

Timeline for 2022:

  • Filling out the registration form and sending it to respond@cdp.net;
  • Payment of the fee;
  • Filling out the questionnaire (short for those who are for the first time and turnover <500 million dollars);
  • Improving energy efficiency in buildings and production processes;
  • Reduction of emissions from combustion (industrial and non-industrial);
  • Green financing (n-r, purchase of green certificates, investments in green projects);
  • Low-carbon energy consumption;
  • Reducing emissions from transport;
  • Waste reduction and material recycling;
  • Implementation of climate policy achievement of goals.

 

By July 28 of the current year, it is necessary to fill in all the data of the reporting company.

 

 

Subsidized participation (for emerging companies/markets):

  • reporting via CDP platform and availability of all reporting tools

Standard participation:

  • participation in one CDP event

Extended participation:

  • participation in CDP events during the reporting period
  • access to the Benchmark (comparison with 10 companies)
  • verification of the “climatic” parameters of 50 suppliers

 

CDP Rating Improvement:  awareness of climate risks -> taking measures to reduce the impact of risks -> planning to reduce emissions.

 

5. Task Force on Climate-related Financial Disclosures (TCFD)

Provides recommendations for reporting on carbon-intensive assets. TCFD has developed 11 recommendations in four areas: corporate governance, strategy, risk management, metrics and targets. To increase the efficiency of disclosure of environmental impact data for the purpose of deliberate investment, lending and business insurance. TCFD’s recommendations on climate-related financial disclosure are widely applicable to various sectors and jurisdictions. They are designed to collect forward-looking information useful for decision-making, which can be included in the main financial documents.

 

Helping achieve high-quality disclosure that will allow users to understand the impact of climate change, TCFD recommends that organizations consider seven principles that should be:

  1. relevant;
  2. specific and complete;
  3. clear, balanced and understandable;
  4. consistent over time;
  5. comparable between participants by industry or portfolio;
  6. reliable, verifiable and objective;
  7. timely.

 

Ratings in demand among ESG analysts and recognized by investors

  • MSI is a leading provider of decision support tools and services for the global investment community.
  • S&P Global CSA provides detailed ESG benchmarking data for better integration of sustainability strategy and business strategy. S&P Global ratings reflect the nuances and differences of policies and programs, as well as detailed information about ESG in the company.
  • Sustainalytics is the world’s leading provider of ESG research, ratings and data.

 

What gives companies an ESG rating?

  • objective and independent expert opinion on the quality of the risk management system;
  • obtaining a confirmed report on compliance with the principles of sustainable development;
  • assessment of the effectiveness of steps to greening activities, attractiveness to investors, quality of management and the level of social orientation;
  • forecasting the possibility of risks;
  • involvement of partners managing their risks.

 

Authors: Marina Kupriyanova, Vladislav Rossinsky

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