With respect to the current state of ESG disclosure globally, issuer reporting frameworks for ESG information are fragmented. There is a lack of uniformity and consistency in how companies report ESG data, leading to challenges for investors and other stakeholders.
* Diverse Standards: Multiple frameworks and standards exist for ESG reporting, such as GRI (Global Reporting Initiative), SASB (Sustainability Accounting Standards Board), and TCFD (Task Force on Climate-related Financial Disclosures). Each framework has its own set of guidelines, leading to inconsistencies in reporting.
* Regional Differences: ESG disclosure requirements vary significantly across regions and countries.
Some regions have mandatory reporting requirements, while others rely on voluntary disclosures, contributing to the fragmentation.
* Comparability Issues: The lack of harmonization in ESG reporting makes it difficult for investors to compare ESG performance across companies and sectors. This fragmentation poses challenges in assessing and integrating ESG factors into investment decisions.
References:
* MSCI ESG Ratings Methodology (2022) - Discusses the fragmented nature of ESG disclosure frameworks and the impact on data comparability and investor decision-making.
* ESG-Ratings-Methodology-Exec-Summary (2022) - Highlights the challenges posed by diverse and fragmented ESG reporting standards globally.