The first and second articles analysed the milestones that consolidated or set trends last year in the areas of Sustainable Development Goals, human rights legislation, gender equality, employee disconnection, climate change, air pollution and the circular economy.
In this article, continuing in the same vein, we provide an overview of the key issues in 2017 (which will shape the media agenda in 2018) in connection with environmental, social and governance (ESG) criteria in investing, tax contribution and non-financial disclosures.
ESG criteria in investment decisions
There is a growing demand from stakeholders for social, environmental and governance aspects to be factored into business management. An example of this is the creation of Shareholders for Change, a new network of investors whose purpose is to encourage shareholder activism on issues such as climate change, labour rights and fiscal justice.
A group of shareholders filed a claim against Australia's largest bank, Commonwealth Bank, on the grounds that its financial reports did not mention climate change as a financial risk. As a result of pressure from stakeholders, companies have started reporting these risks, many adopting the recommendations from the Financial Stability Board's Task Force on Climate-Related Financial Disclosures (TFCD); ANZ was the first bank to do so.
Regarding investing based on social and environmental criteria, issuance of green bonds (by governments, companies, etc.) set another record, having increased by 33% on 2016. The World Bank announced it will stop financing oil and gas projects, and private sector actors such as ING Bank and insurer AXA have made similar commitments.
Tax contribution, fiscal transparency and non-financial disclosures
There have also been reports that many large companies are not paying taxes where they should, or are not paying enough. Media scrutiny in this matter is growing. In 2017, the European Council amended the Anti Tax Avoidance Directive to tackle hybrid mismatches with the tax systems of countries outside the EU, i.e. to prevent companies from using differences in tax systems between member estates and non-EU countries to avoid taxes. Tax havens are still in the spotlight, mainly due to discrepancies between governmental and non-governmental organisations over the criteria used for officially designating territories as tax havens.
Also in Europe, the European Directive as regards disclosure of non-financial and diversity information was fully transposed in 2017, Spain being the last country where it was approved, after a delay of almost a year. This means that companies, depending on their characteristics, are subject to the same deadlines for approving their financial disclosures and for reporting on social, environmental, human rights, workforce and diversity aspects.
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