Why should my organisation report on ESG

The case for ESG 

An ESG proposition that includes D&I can create higher value by increasing returns, reducing rising optional expenses, enhance employee proposition and productivity, and ease regulatory pressures and contributes to downside risks. 1

In 2021, 78% of board members and senior executives agreed that strong ESG performance contributes to organisational value and financial performance. 2

Social criteria are gaining prominence in Australia

Research has shown increasing social-related shareholder proposals, trends and executive leadership and governance support and prioritisation for a focus on social criteria.

For example:

  • Social-related shareholder proposals have risen 37% in 2021 compared to 2020. 3
  • Social megatrends. CSIRO has identified that elevating the importance of diversity, equity, and transparency in business, policy and community decision making as one of the key megatrends (megatrends being described as trajectories of change that would unfold over years or decades). 4 This includes diversity and inclusion dimensions such as workforce gender diversity, workforce cultures, and reinstating the value of First Nations’ knowledge. 5
  • Leadership support for DEI. KPMG’s research shows that 64% of leaders from organisations with revenue of more than $500 million say that diversity, equity, and inclusion would be one of their priorities for 2030. 6 
  • Governance and senior executive support. In 2021, 78% of board members and senior executives agreed that strong ESG performance contributes to organisational value and financial performance. 7

Meeting stakeholder and investor demands

Stakeholder and investor demands for ESG have grown, alongside increasing recognition that a strong ESG proposition safeguards an organisation’s long-term success.8 ESG reporting provides stakeholders and investors a framework to assess an organisation’s impact and enhances transparency, trust, and accountability. In turn, this enables investors and stakeholders to make informed decisions. 9

Growth in investor expectations and demands around ESG is evident in growing global investments.

For example:

  • In 2022, ESG assets funds were valued at $387 billion USD (worldwide), with many ESG funds outperforming non-ESG funds 10. 
  • 81% of the 77 largest global asset managers (managing a combined USD 77 trillion in AUM  (Assets under management) across Americas, Europe, and Asia Pacific) have voting policies based on social issues. 11
  • In the US, inflows into sustainable funds have increased over the years, from $5 billion in 2018 to $50 billion in 2020 to nearly $70 billion in 2021. 12

UN Principles of Responsible Investment

Investors are increasingly taking ESG factors outlined by the UN Principles of Responsible Investment into account when making financial decision. 13 Private equity and venture capital managers have also increasingly aligned with these UN principles – in fact, signatories have increased 4 times from 2017-2022. 14 There were 5,345 signatories at 31 March 2024, with an total AUM of 128.4 trillion USD. 15

The 6 principles include:

  1. We will incorporate ESG issues into investment analysis and decision-making processes
  2. We will be active owners and incorporate ESG issues into our ownership policies and practices
  3. We will see appropriate disclosure on ESG issues by the entities in which we invest
  4. We will promote acceptance and implementation of the Principles within the investment industry
  5. We will work together to enhance our effectiveness in implementing the Principles
  6. We will each report on our activities and progress towards implementing the Principles.
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Go to Plan your ESG and D&I strategy
  1. Henisz, Koller, and Nutall, “Five Ways That ESG Creates Value: Getting Your Environmental, Social, and Governance (ESG) Proposition Right Links to Higher Value Creation. Here’s Why.”; Standards Australia, “Standards: The Building Blocks of Trust for Australia’s ESG Investing Landscape.”
  2. PwC, “ESG-Driven Remuneration: Enhancing Sustainability in the Asset and Wealth Management Industry,” April 2024, 5, https://www.pwc.com/sg/en/publications/assets/page/esg-driven-remuneration.pdf
  3. Lucy Perez et al., “Does ESG Really Matter - and Why?,” McKinsey Quarterly, August 10, 2022.
  4. Claire Naughtin et al., “Our Future World: Global Megatrends Impacting the Way We Live over Coming Decades,” Brisbane, Australia: CSIRO, July 2022.
  5. Naughtin et al., 43.
  6. KPMG, “30 Voices on 2030: The ESG Revolution,” 19.
  7. PwC, “ESG-Driven Remuneration: Enhancing Sustainability in the Asset and Wealth Management Industry,” 5.
  8. Henisz, Koller, and Nutall, “Five Ways That ESG Creates Value: Getting Your Environmental, Social, and Governance (ESG) Proposition Right Links to Higher Value Creation. Here’s Why.”
  9. Elidrisy, “Comparative Review of ESG Reporting Standards: ESRS European Sustainability Reporting Standards versus ISSB International Sustainability Standards Board”; HSBC Australia, “Sustainability vs ESG: What’s the Difference and Why They Matter.”
  10. Standards Australia, “Standards: The Building Blocks of Trust for Australia’s ESG Investing Landscape.”
  11. Danielle Vrublevskis and Marina Zorila, “Point of No Returns 2023, Part II: Stewardship and Governance” (ShareAction, March 2023).
  12. Perez et al., “Does ESG Really Matter - and Why?”
  13. Bose, “Evolution of ESG Reporting Frameworks,” 14.
  14. PwC, “ESG-Driven Remuneration: Enhancing Sustainability in the Asset and Wealth Management Industry,” 9.
  15. United Nations Principles for Responsible Investment (UNPRI), “Principles for Responsible Investment: Annual Report 2024,” March 31, 2024.