Professional accountants need to respond to increasing demand from investors for non-financial information, specifically environmental, social and governance disclosures, according to a new report.

Roger Tabor

The report, from the Professional Accountants in Business Committee of the International Federation of Accountants, considers trends in investor demand for environmental, social, and governance information.

It also recommends how professional accountants can better support their organizations in responding to these demands, and ultimately improve the management and reporting of such performance issues.

The report, Investor Demand for Environmental, Social, and Governance Disclosures: Implications for Professional Accountants in Business, highlights an evolving trend toward greater interest in ESG factors, and integration of these factors and ESG performance information into investment processes and decisions.

“As professional accountants both support and fill leadership roles in management operations and control, as well as stakeholder communications, they are well placed to apply accounting discipline and rigor to the collection, analysis, and reporting of ESG data, and to support the incorporation of ESG factors into their organization’s management processes, systems, and reporting,” said Roger Tabor, who chairs IFAC’s PAIB Committee. “Their involvement in improving the relevance and quality of their organization’s internal and external business reporting will be critical to meet the challenge of increasing the use of ESG information.”

The report recommends five actions for accountants and the profession to take:
• engage investors effectively to understand their information needs and communicate performance;
• incorporate ESG factors and non-financial performance information into governance and accountability arrangements to improve information and disclosure quality;
• link financial and non-financial performance and outcomes to improve understanding of sustainable value creation;
• ensure that ESG disclosures meet investor needs by being material, timely, consistent, and comparable in order to improve usefulness of reporting and greater transparency; and
• bring together data that may be dispersed in different parts of the organization or its supply chain to support internal and external decision making.

Other groups are also working on such issues, including the International Integrated Reporting Committee, which was formed last year by The Prince of Wales’ Accounting for Sustainability Project, the Global Reporting Initiative and IFAC (see Framework Proposed for Integrating Financial, Environmental and Social Reporting).