EY has outlined five key priorities that need to be addressed within ESG reporting in order for markets to continue to have trust in this data.
In what EY described as a “make or break” moment for ESG, the company highlighted these issues that ESG investment needs to address.
EY’s report found that the transparency of ESG ratings needs to increase, highlighting the current widespread disparity and lack of correlation between ESG rating providers.
As it stands, the report said, this lack of correlation “reduce(s) trust in the broader sustainability information ecosystem”.
The report also recommended the sector needs to increase its understanding of the varying uses of sustainability information, clarifying financial risk and social impact, which it found to be easily confused.
Marie-Laure Delarue, EY global vice chair (assurance) explained: “There is a lack of a common language for sustainability reporting – the “alphabet soup” that has long defined the environment is a jumble that satisfies no one.”
EY further called for the development of comparable and interoperable taxonomies in order to increase transparency and comparability across regional markets while taking into consideration those markets have different legal architectures and economic structures.
The report called for barriers to market participants in emerging economies to be lowered in order that they can benefit from the private capital that is seeking sustainable investments.
Furthermore, it recommended putting in place the conditions to enable assurance, foreseeing an increased demand in the future for robust, independent external assurance.
This could be fuelled further by mandatory assurance requirements for sustainability disclosures which are currently under consideration in Europe and in the US.
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