Nasdaq introduced its latest version of the ESG Reporting Guide, a resource for global companies to adopt best-in-class practices to navigate new developments in the field of environmental, social and governance (ESG).
The newly released guide addresses recent sustainability efforts, including the Sustainability Accounting Standards Board (SASB), the UN Sustainability Development Goals and the Task Force on Non-Financial Climate Disclosures (TCFD), and outlines the latest third-party reporting methodologies. It also aims to stimulate corporate sustainability actions, such as the documentation and management of ESG performance, the integration of ESG indicators in enterprise risk management systems, the disclosure of ESG data and the inclusion of ESG in indexes.
This resource builds on Nasdaq's first ESG Reporting Guide, which was unveiled in March 2017 as somewhat of a test, both in business intent and regional focus. The first guide was specifically geared toward Nordic and Baltic public companies as a means to further engage with them on the emergence of ESG data. At the time, those regional markets were one of the few with clear investor expectations and greater regulations with regards to ESG.
Over the past two years, however, ESG has grown rapidly, spreading to global market s and investors. According to the guide, the growth in ESG comes amid a growing body of academic and analytic evidence that suggests ESG excellence correlates with other benefits, such as lower costs of capital, reduced shareholder turnover and enhanced talent recruitment and retention.
"Companies that compete and survive in a resource-constrained world will become the new baseline, and market forces will reward some and punish others," said Evan Harvey, Nasdaq's Global Head of Sustainability. "Nasdaq must itself navigate this transition (to new energy sourcing, better human capital management, more inclusive economics, and so on) and assist our listed companies in doing likewise. That is why we pursue this work, and why we offer this guide as a resource."
As both public and private companies consider ESG initiatives, they must also account for new developments in the field. The SASB advocates for the inclusion of certain sector-based ESG disclosures in filings with the U.S. Securities and Exchange Commission (SEC), while the TCFD recommends much more robust environmental reporting in financial filings. The UN also has its 17 Sustainable Development Goals , which are a universal call to action to end poverty and protect the planet.
Furthermore, institutional investors-perhaps most notably BlackRock, which manages more than $6.5 trillion in assets-are pushing for KPIs that provide real insight into long-term value creation. Some activist investors are pressuring companies on ESG topics as well, asking companies to consider reducing their carbon emissions and begin issuing gender pay gap reports.
"Our goal is to take an increasing role in facilitating ESG practices, disclosures, and dialogue between investors and public companies," Nasdaq President and CEO Adena Friedman wrote on LinkedIn in January. "This not only creates liquidity for new investible products, such as ESG index futures, green bonds, and exchange-traded products that focus on ESG principles-but it will also likely create a better, more sustainable economy over the long-term."
Learn more about the new global ESG Reporting Guide here .