Industry steps up calls for improved sustainability disclosure regime

UK Sustainable Investment and Finance Association (UKSIF) has reiterated its call for a stronger and clearer sustainability disclosure regime, in line with ISSB, to be adopted as research showed investors could be subject to hidden risks and misallocation of capital.

Meanwhile, the the Principles for Responsible Investment (PRI) has co-written a letter to regulators around the globe urging them to strengthen climate-related financial reporting.

ESG data quality

The UKSIF’s report, Unlocking Growth Through Enhanced Sustainability Data, surveyed 20 UKSIF members with £4.5trn in combined global AUM to gauge the investment community’s experience and use of sustainability data. It found 85% of respondents cited issues with the accuracy of company disclosures, 70% highlighted their difficulty verifying or validating ESG data, and 70% pointed to gaps in ESG data coverage.

Respondents said the quality of ESG data needed to be improved with two thirds rating it ‘moderate’ and none rating it ‘very high’.

The report concluded the current state of company sustainability reporting is “fragmented and needs to evolve to help investors navigate the sustainability transition”, and lower standards of ESG data could result in material issues, such as funds being “misallocated due to hidden sustainability risks”.

The findings underscore the need for mandatory, standardised disclosures in the UK aligned with International Sustainability Standards Board (ISSB) standards, coupled with climate transition plans integrated within companies’ existing reporting, the report said.

Commenting on the findings, UKSIF CEO James Alexander said: “This data shows that high-quality sustainability disclosures are increasingly essential for investors. However, despite progress on sustainability reporting in recent years, most of our survey respondents believe ESG data is falling short of the highest standards.

“That’s why a bold step forward in the UK’s sustainability disclosures regime is so important, helping investors take more informed decisions, which can strengthen the country’s global competitiveness.

“The findings of this report support our ongoing call for the adoption of the ISSB disclosure standards as the mandatory UK baseline, alongside the phased introduction of climate transition plans for larger companies.

“If implemented effectively, these reforms have the potential to tackle existing data issues, support companies to disclose in a proportionate manner, and enhance the consistency, completeness and forward-looking value of sustainability information.”

PRI writes to regulators

In an additional call for further improvements around sustainability reporting, yesterday (16 December) the PRI, the Institutional Investors Group on Climate Change (IIGCC) and Ceres have written to regulators in the UK, EU, Canada and Australia urging them to strengthen climate-related financial reporting, and endorse the new guidance from the International Accounting Standards Board (IASB).

The new guidance included illustrative examples demonstrating how companies can apply IFRS Accounting Standards when reporting the effects of uncertainties in their financial statements. It follows feedback from stakeholders that said the information companies provide about the effects of uncertainties is sometimes insufficient or appears inconsistent with the information provided outside their financial statements. The IASB illustrative examples were found to improve this.

The PRI letter calls for regulators to publicly support the illustrative examples and help improve investor interpretation and support individual decision making.

Specifically, the bodies called on the European Securities and Markets Authority (ESMA), the Australian Securities and Investments Commission (ASIC), the Canadian Securities Administrators (CSA), and the Financial Reporting Council (FRC) to:

Coordinate with other regulators to ensure consistent expectations and messaging.
Formally welcome the IASB’s illustrative examples and clarify that companies should consider them – and the requirements of the IFRS Accounting Standards they illustrate – when determining disclosures on climate-related matters.
Engage with auditors to promote consistency across financial reports.
Monitor company practice and consider supervision measures where material climate-related uncertainties remain unaddressed in financials.

Nathan Fabian, chief sustainable systems officer at the PRI, said: “It’s no secret that financial statements often don’t tell investors everything they need to know about the financial risks and opportunities facing a company. Market uptake of the IASB’s illustrative examples would be an important step toward making financial statements more reflective of climate-related risks and other uncertainties. We’re calling on regulators to publicly support their use so investors can make better-informed decisions and fulfil their duties to clients and beneficiaries.”

Stephanie Pfeifer, CEO at IIGCC, added: “Climate change is already having material impacts on companies’ financial position and long-term prospects, and that reality needs to be visible in the financial statements investors rely on. Building on IIGCC’s recent investor expectations on integrating climate risks into financial statements, the IASB’s newly published illustrative examples offer much needed practical support to companies and auditors as they apply existing accounting requirements. Regulators have a crucial role in promoting the illustrative examples and ensuring consistent application of the standards. This will improve transparency, strengthen market integrity, and enable investors to allocate capital in line with sustainable long term value creation.”

Tangible financial gains

This comes at a time when research from the Global Reporting Initiative (GRI) found a positive correlation between sustainability reporting and financial performance.

GRI analysed the key conclusions and themes from 30 studies published between 2010 and 2025 and found that most studies demonstrate that sustainability reporting leads to improved financial performance, particularly when aligned with globally accepted standards.

In particular, it concluded sustainability reporting provides tangible financial gains, with factors such as sector, size, regulatory environment and geography all being influential.

Organisations in high-risk industries – such as energy, mining, and manufacturing – realise the strongest financial benefits from sustainability reporting, reinforcing the value of sector-specific disclosure guidance. Further, reporting using the GRI Standards is linked to reputational advantages – such as increased stakeholder trust, brand loyalty and employee satisfaction – which can translate into improved access to capital from investors.

Bastian Buck, GRI chief standards officer, commented: “At GRI, we have long understood that sustainability reporting offers multiple benefits to organizations, the environment and society. Yet its relevance to the corporate bottom line is often undervalued. It is therefore significant that 73% of the studies we analyzed found a positive correlation between sustainability reporting and financial performance.

“More action and support are needed to increase the quality and use of sustainability reporting, including reporting on impacts. The GRI Standards have a central role to play in the emerging global reporting system.”