Companies are making progress on environmental, social and governance (ESG) reporting. This is an issue that’s long been a source of frustration. It’s also one that’s stood in the way of broader corporate-level ESG adoption.
Lack of uniformity regarding ESG reporting has been a problem for money managers looking to direct clients to ESG funds. With strides being made, the audience of users of exchange traded funds such as the Calvert US Select Equity ETF (CVSE ) could expand.
Many companies admit to being in their infancies when it comes to ESG disclosures and reporting. CVSE is a relevant ETF in this conversation because it’s actively managed. That management style could signal that managers have discretion in terms of selecting shares of companies that are leaders or making progress on ESG reporting.
ESG Reporting Taking Shape
A survey by Compliance Week confirms corporate-level ESG disclosures are improving.
“For the second year, Compliance Week polled risk and compliance practitioners on their climate-related disclosure efforts as part of our annual ‘Inside the Mind of the CCO’ survey,” reported Aly McDevitt for the publication. “The survey received 322 responses. Of that total, 128 said they must comply with the Securities and Exchange Commission’s proposed climate-related disclosure rule and/or the European Union’s Corporate Sustainability Reporting Directive (CSRD).”
For its part, CVSE focuses on domestic large-cap equities. That’s fertile territory when it comes to identifying ESG-committed firms. On a related note, European regulators have generated results from pushes for better ESG disclosures. The U.S. is making progress in that area, too. Over time, that could spur more advisors to embrace funds such as CVSE.
“For nearly half (45 percent) the practitioners, both the CSRD and the proposed SEC rules will pertain to their business. About a third (34 percent) said only the SEC rules have relevance. The remaining 21 percent said only the CSRD will apply,” according to Compliance Week.
Improved ESG disclosures are important. But that importance is amplified at a time when the “S” in ESG is increasingly a point of emphasis for investors.
“Regardless of the nomenclature, investors, consumers, employees, and the policymaking bodies that oversee these companies want to understand what organizations are doing to manage risks and support their people and the planet in the work that they undertake. That’s unlikely to change. Even when concepts like equity and inclusion are criticized as ‘woke’ to fit a political narrative, employees link their job satisfaction to their companies’ commitment to diversity, equity and inclusion (DEI),” noted CSR Wire.
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