By Scott McAusland, Media Communications Manager, GRI

Over the coming years, markets and regulation will be redefined in an age where transparency and accountability will be the buzzwords. As we seek to rebuild the global financial system following a crisis that was at least in part brought about through opaque financial dealings, regulators and markets will seek greater public transparency and disclosure from our financial institutions.

A Common Framework for Sustainability Reporting

The Global Reporting Initiative (GRI) is the developer of the world’s most widely used sustainability reporting framework which enables like-for-like comparison to be made between companies, and for change to be effected from within a company.

Although merely eleven years old, GRI has made great progress in developing a common language to enable businesses to communicate with their diverse groups of stakeholders on issues of common concern. Today, the GRI’s latest version of the Sustainability Reporting Guidelines – G3 – provides the world’s most widely-used framework for sustainability reporting. The Guidelines are made freely available as a public good for companies and other organizations globally, irrespective of size, sector or country.

Thus using the GRI’s Sustainability Reporting Framework allows companies to issue reports that enable them to engage with stakeholders, including regulators, employees, buyers, and investors on a range of economic, environmental, and social issues.

Investors were at the forefront of the creation of GRI as an independent institution and remain one of GRI’s key stakeholder groups. GRI has an essential role to play in ensuring that there is consistent, material, and reliable information on sustainability performance available to the financial markets. Without standardized information, investors and the financial markets will be unable to integrate environmental and social factors into their decision-making.

Completing the Circle – Providing Guidance Tailored to Financial Firms for Their Own Reporting

As one of the main consumers of the information contained within sustainability reports, it is perhaps unsurprising that the financial services sector understands the importance of disclosing sustainability performance and thus produces more sustainability reports of its own than any other sector.

However, in addition to the core universally applicable guidelines, the financial services sectors faces additional unique sustainability challenges and therefore requires additional reporting guidance.

At first sight banks, insurers, asset managers and the rest may not seem to have, for example, a large potential carbon footprint or, given the size of the bonuses paid to senior staff, a need to consider their labor conditions. However the potential sustainability impacts of firms in the finance sector are huge – not necessarily through their direct operations, but rather through their investments, capital finance projects and other lending. Who are they lending to? Are they making loans available to projects that will scar the face of a community and its environment? Financial institutions often have massive shareholdings in companies along with the associated voting rights. How are these exercised? Is the institution using its votes to provide solutions to the economic, environmental and social problems our planet faces, or are they exacerbating these problems?

In order to develop guidance for this crucial sector, GRI joined with The United Nations Environment Programme through their Finance Initiative (UNEPFI) – a partnership with 180 financial service institutions worldwide. The reporting guidance was developed over a five-year period.

An international working group of experts from the finance sector, labor organizations, research firms and civil society organizations drafted guidance which was then opened to extensive public consultation.

Among guidance that emerged from this process are indicators which firms should report in, including the following:

• Voting policies applied to environmental or social issues for shares over which the reporting organization holds the right to vote shares or advises on voting
• Percentage and number of companies held in the institution’s portfolio with which the reporting organization has interacted on environmental or social issues.
• Percentage of assets subject to positive and negative environmental or social screening
• Monetary value of products and services designed to deliver a specific social benefit for each business line broken down by purpose.

In total, there are twelve new indicators for firms to consider in their reporting, but the new guidance also explains how financial services firms can apply the core G3 Guidelines.

Integrating the New Guidance for Existing Reporters

GRI is aware of over 130 companies in the Financial Services Sector who already issue sustainability reports. For them it will be easy to adapt to the new reporting requirements – in fact the guidance now tailored specifically to their needs will make it easier than ever to report.

Using the Guidance to Rebuild Reputations

Banks, insurers and asset managers, struggling to improve their battered reputations following the events of the last two years will find great benefit from reporting using the new guidance. According to Sylvie Lemmet, Director, UNEP Division for Technology, Industry and Economics: “The standard is of great relevance in today’s world where disclosure and transparency is considered a key responsibility of financial institutions. The launch of the Supplement is timely and presents a concrete way for financial institutions to report on their corporate responsibility.”