Anyone looking at your financial reporting – for example banks, potential investors, customers – will want to know what you’re doing in relation to CSR (Corporate Social Responsibility) and (Environmental, Social, Governance) issues and may downgrade their judgement if they don’t like what they see.
Customers could go elsewhere. New payment risks could come from more difficult access to financing for companies with higher carbon footprints. Assets could be at risk of stranding because of regulatory decisions.
Your own reporting should include an account of your company’s performance in Environmental, Social, and Governance matters that have an impact on your company’s performance.
But beware when presenting extra-financial information:
- Be sure the statistics you present are accurate and believable.
- Ensure the results linked to ESG matters can be traced back to your KPIs.
- Make sure your own governance in practice matches what your ESG report says in theory.
In June of 2020, we became the indicators for all ESG-related issues into our rating methodology to help the companies we serve analyse and evaluate the sustainable development and long-term issues deployed in their strategy.
The rating augments our country ratings with a set of indicators related to coupled with sentiment analysis drawn from social media to ascertain political risk. (Governance issues such as regulatory and legal frameworks are already part of our country ratings since 2003).
“ESG matters were not thought of before,” says Nicolas Marchenoir, Head of Energy Risk at Euler Hermes. “Now they’re key considerations, and any company that doesn’t take these into account is taking the risk to fail in the next ten years or less.”