What is sustainability?

• Corporate sustainability relates to how Environmental, Social and Governance (“ESG”) issues are managed.

Why is sustainability relevant to investors? Why invest in companies that embrace sustainability?

• Environmental and social issues affect a company’s financial performance  Tweet This!: share prices of companies that embrace sustainability outperform, sooner or later, those of other companies who haven’t done so.
• Communicating a firm’s approach and performance in relation to sustainability issues shows transparency.
• By investing in a sustainable company, an investor is proactively supporting a company that invests in its future.
• ESG issues create huge opportunities for companies: new revenue flows, lower costs of capital, enhanced reputation, attracting and retaining talented professionals, among others.
• Companies that do not disclose sustainability information may not be meeting regulatory requirements.

Where can an investor find sustainability information?

• Companies report their sustainability performance in a separate sustainability report, within their annual report, or on their website (or a combination of the three).

What should an investor look for to evaluate possible risks?

• Check if the company reports according to the Global Reporting Initiative’s (GRI) guidelines (including, for example, a GRI Content Index), or industry-specific guidelines.
• Look for evidence (glancing through the CEO’s statement) that the risks and opportunities created by environmental and social issues have been assessed. Does the company seem to have a sustainability strategy in place?
• Look for information relating to sustainability governance.
• Is there a materiality process for identifying and reporting on significant (material) issues and risks?
• Are there any charts and/or graphs showing the company’s performance against the most important material issues (e.g. energy use, employee diversity etc)?
• Is the company involved in two-way communication with its stakeholders (stakeholder engagement)? Does it take the interests and concerns of its stakeholders into account?
• Is the company transparent and honest in its reporting?

References:

This article was compiled using a publication by SGX. For the sake of readability, we did not use brackets or ellipses but made sure that the extra or missing words did not change the publication’s meaning. If you would like to quote these written sources from the original please revert to the link below:

http://www.sgx.com/wps/wcm/connect/a16635004f5d413d82cec68a5f495198/SGX+Investors+Guide+Sustainability.pdf?MOD=AJPERES

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